Issue 15 | Thursday 29 July 2021 | Gold Coast Property Investors Needed
Hi, Andrew Bell here with you and I am so sorry to hear about the terrible situation so many people are finding themselves in with yet another lockdown in many parts of Australia and restrictions in others. It just reminds us of how lucky we are here in Queensland, but fingers crossed that continues.
Today I want to talk about one of the missing components of the real estate market which has been investors. At the very time that investors were needed in greater numbers than ever, they have been missing in action. There is no clear reason for it, but one can only imagine that as the surge in real estate prices gained momentum in the second half of 2020, investors focused on returns would have felt priced out of the market as they saw prices increase. However, with rental values increasing substantially, and with the realisation that they have been missing out on the capital gain of owing properties, they are starting to come back into the marketplace.
I have some interesting information in this space, but it is also one of the things that our office is truly focusing on at present. We have record 89 properties going to auction throughout July and we are mindful that many of these properties would be ideal for investors to buy. There is such an acute shortage of rental properties here on the Gold Coast and we are in desperate need to help many people who are migrating here from Victoria and New South Wales into rental properties as their first accommodation platform.
The latest Australian Bureau of Statistics figures shows the value of national investor lending rose 12.7 per cent in March 2021 to $7.8 billion, and whilst below the usual 33 per cent long-term average of total numbers of buyers in the marketplace, at the current 25.9 per cent we are certainly off historical norms.
First-home buyers are beginning to be pushed out of the market with less Government support following the end of the historical high home loan grant period, and we are now seeing the investors returning to the market at greater numbers than first-home buyers.
The significant jump in annual rentals while adding to the cost of living for tenants has indeed helped them longer term as the increasing number of investors entering the market means there will be greater choice, and with greater choice means some softening in rental rates over time. However, for the present, there is a dire need for signifantly more rental properties. It is not unusual for us to receive 50 or more inspections on any new rental property we bring to the market, and there of course can only be one person who can be helped in those situations.
There are constant surprises in our marketplace and one of them is that it is almost impossible to negative gear these days. In fact, the proportion of landlords with negatively geared rental properties has fallen to below 60 per cent for the first time on record. This is of course a combination of two things – the first and most significant is the reduction in interest paid on loans, and the second is because of higher rental rates.
Of the 2.2 million taxpayers owning at least one rental property, 1.3 million declared a net rental loss in 2018-19, according to new data by the Australian Taxation Office. Overall, the net rent income was negative $3 billion. There were 19,113 fewer negatively-geared landlords than in 2017-18, the first fall in the number of negatively geared investors in five years.
As a share of total landlords, 58.6 per cent claimed a net rental loss – the first time since records dating back to 2003-04 show a sub-60 per cent result. This fall in negative gearing is likely to continue, and I would suspect be even greater in the current financial year.
The whole thinking around investment has changed. In years gone by, investing in real estate was looked at as a tax strategy – to use negative gearing to fund the purchase of real estate. Today, people look at it vastly different and they see it as an investment to give them annual income – positively geared real estate. That is because for the first time in a long time that can truly happen, and so when people have money to invest the questions are: do I put it into the stock market? Do I leave it in the bank? Do I invest in some bonding scheme? The answer time and time again is that the safest investment of all is real estate, which appreciates in value and gives a positive annual income.
Investors, please have a good look at the remaining properties we have in this month’s auction program. These are committed sellers who want their properties sold on auction day. We will have tenants lined up for you from the day the property settles and not only are you now obtaining cashflow positive properties, but you are also capturing significant capital gain. Name an investment that is better than real estate in the marketplace at present?! It is not fixed deposits in the bank, and it is not the stock market. It is real estate. Have a good look at the list of properties we have featured in this eNewsletter and let us know if we can help you.
Don’t forget, if you haven’t yet booked in to attend the Ray White Muscular Dystrophy Ball it is on Saturday 11 September. There are only approximately 9 tables left, so book today via the details on screen now.
Best wishes to everyone throughout the country.
Andrew Bell, OAM
Chief Executive Officer
The Ray White Surfers Paradise Group