21 Dec Busting Property Myths
Residential real estate holds significant value for Australians. Financially, it is the country’s largest asset class, with a valuation of over $7 trillion. Emotionally, it defines the Great Australian Dream.
The average cost of buying a house in Australia is 7.2 times the annual income of a typical household, up from 4.2 times annual household income 15 years ago.
The information in our Myth Busting below, was put together in September 2017 by 12 Certified Practising Accountants (CPAs) in Melbourne and Sydney. Known as the CPA ChangeMakers, their aim is to develop a series of recommendations to address housing affordability in Australia.
Their discussions were informed by data and insights from Peter Munckton, chief economist at Bank of Queensland, Greg Dickason, chief technology officer at CoreLogic, and Andy Gooden, chief operating officer of Little Real Estate.
There are many myths attached to housing affordability.
The CPA ChangeMakers examined three common misconceptions. Read about them below!
Myth # Foreign Investors are Buying up Property
Property purchases by foreign investors are regulated by the Foreign Investment Review Board (FIRB). Non-residents can only buy new or off-the-plan properties. People who live here for less than 12 months can buy one existing property, but they must live in it and they have to sell it when their visa expires. According to the FIRB annual report, foreign investment in residential property totalled $13.5 billion for the 2015- 2016 year – just 4.4% of the $303.8 billion in transactions.
Myth # Investors Own Multiple Properties
Multiple property ownership is less common than some media stories may suggest.
“Less than 8% of Australians (1,764,924 people) own an investment property and around 18% of those own two investment properties and only 2% own four 1.”
Myth # Negative Gearing is Driving Up Prices
Negative gearing allows property investors to claim a tax deduction for the amount of loss their property incurs. However, it plays a minimal role in housing affordability – it is a tax benefit, not an investment strategy.
Less than 13% of Australian taxpayers were negatively gearing investments in 2014-15 2
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1 RP Data and 2011 Census Data
2 Australian Taxation Office 2014-15