Investors in all income brackets need to be concerned about the total cost of their rental losses, according to RP Data commenting on recent Australian Tax Office statistics.
Over the 2009/2010 financial year, only 37 per cent of individuals made a profit on their investment properties, while of the 1,110,922 investors making a loss, 825,284 earn below $80,000 a year and are typically losing $156 per week.
Those in the higher income bracket, some 285,638 investors, typically lose $232 per week.
This has led Cameron Kusher, RP Data’s senior research analyst, to believe that many investors are buying investment properties for the taxation benefits and are aiming towards capital gains or positive cash flow in the near future.
“Given the current economic and housing market conditions, it seems as if these investors will be reliant on a pick-up in rental growth to propel them to positive gearing rather than capital gains.
“The results highlight that most property investors are negatively geared. Of course some will be quite happy to be negatively geared with the cost offsetting tax elsewhere while others, particularly those nearing retirement or at retirement, will be hoping the property starts to turn a profit in the near future,” Mr Kusher said, indicating investors need to consider what they are trying to achieve with investing.
He recommends that investors are careful when looking at buying in the current market, and aim for long-term strategies rather than hoping for short-term capital gains.