The latest housing market figures show record price rises and a decline in negative gearing, suggesting Aussie landlords are winning across the board

  • Australia’s housing market experienced its greatest quarterly growth in a decade through the first months of 2021, the Real Estate Institute of Australia states.
  • Separately, the latest Australian Taxation Office data shows the number of landlords whose expenses outweighed their rental incomes dropped over 2018-2019.
  • Taken together, the figures suggest there’s hardly been a better time to own property in Australia.
  • Visit Business Insider Australia’s homepage for more stories.

New housing market data shows there’s hardly been a better time for Australian homeowners, whether they’re chasing pure capital gains, rental income to service their mortgages, or the tax benefits of negative gearing.

House prices have increased at the highest quarterly rate in over a decade, according to the Real Estate Institute of Australia (REIA), which on Wednesday claimed values rose 6.8% across the first three months of the year.

Median house prices climbed to nearly $874,000 over the quarter, said REIA president Adrian Kelly. Sydney retains the title of Australia’s priciest market, with a median house price of $1.3 million.

“Over the 12 months to the March quarter, the weighted average capital city median house price increased by 11.1%,” Kelly added.

While Australia’s runaway housing prices are hardly a surprise, the latest figures from the Australian Taxation Office (ATO) help outline the extraordinary power of property as a vehicle for capital growth.

In its latest report, drawn from the 2018-2019 financial year, the ATO states individuals who owned property in Australia booked $14.78 billion in capital gains, and a comparatively paltry $1.32 billion in losses.

Those capital gains far outstripped profits through the stock market, and helped push the value of Australia’s property market to an estimated $8.1 trillion.

The hits don’t stop there, either.

The ATO data dump shows 41.4% Australia’s 2.2 million rental property owners broke even or recorded a net rental profit over 2018-2019, with their earnings outweighing the cost of interest, upkeep, capital works, and other deductions.

With cash-flow positive assets in a rising market, those owners stood to gain the most — but Australia’s generous negative gearing tax concessions mean landlords with costs in excess of their rental incomes aren’t left totally high and dry.

Some 58.6% of all landlords spent more than they earned on their investment properties, granting them the ability to deduct those losses from their taxable personal income. While few owners would ever hope to book a day-to-day loss, that measure undoubtedly helped to soften the blow.

Of course, many of those unprofitable landlords stand to earn big if (or when) they sell their properties.

It might seem phenomenal that nearly 60% of all investment properties earned less in rent than what they cost in upkeep and repairs, but the Australian Financial Review reports it was the lowest such figure in fifteen years.

That downtick can be attributed to interest rates dropping to 1.25% at the tail end of the 2018-2019 financial year, meaning the same amount of rent would have gone further towards mortgage repayments for Australia’s landlords. It stands to reason that effect would be multiplied by Australia’s current rock-bottom interest rates.

Cut to 2021, and rents are staging an uneven recovery, too. Despite rental rates fluctuating through 2020 due to the coronavirus pandemic, Domain data shows national house rental yields grew 0.7% over the March quarter, and unit yields bumped upwards 1.1% over the same time period.

Taken together, there’s reason for Australia’s landlord class to celebrate.

House prices are predicted to keep climbing, building capital gains for lucky investment property owners; the Reserve Bank of Australia isn’t keen to lift the interest rate from 0.1% any time soon, making it easier for landlords to service their mortgages through rent; and major tweaks to negative gearing have become electoral poison, meaning those juicy tax offsets for unprofitable properties should stick around for the foreseeable future.

There’s considerably less cause for joy among tenants who face surging rental price, or prospective owner-occupiers increasingly locked out of the market altogether.

But it’s all good for Australia’s homeowners, so long as the line keeps going up.

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