With the Australian property market still booming and in full swing, you may be wondering who it is that’s throwing all the cash around to make investments. Contrary to the usual suspect – the wealthy full-time property investor, most residential investors don’t use property as their main source of income.
The reality of the situation, is that Australia’s investment market is controlled by people who have purchased their own home. Said people then move on to buy more properties as investments. Small-scale investors such as this account for around 83% of total property market investments.
Rental Housing Investors
Small-scale investors often rent out their second, third (and so on) properties. These typical rental housing investors, are a high-income group or partnership who own a small number of properties for extra income.
The probability of investing in property becomes higher as an individual becomes older, but it then begins to decline once you hit the age of 65 years old.
Home Ownership Rates
Home ownership rates in Australia are fairly high, with 70% of people owning residential properties. The Australian Bureau of Statistics reported that residential investment represents 35% of all housing finance in the country. This leaves 65% of properties in the hands of owner-occupiers.
Therefore, residential investment plays an important role of the mortgage market and banking systems.
The majority of residential investment is built upon the idea of renting or resale – with only a small proportion of money spent going on the construction of new houses. Investment in residential properties by companies or corporations, represents around 8% of the total market – flipping the traditional view on its head.
Private research between 2003 and 2009, suggested that the typical residential investor is aged 42 years old. 72 of said investors are married, with fewer than two thirds of said investors taking out a loan with a co-signatory. One third of investors are female.
The same data revealed that residential investors on average, net around $8,600 per month. This comes to $103,200 per year in net income. Excluding investors earning over $100,000 per month, the average monthly net falls to $6,617 – making it around $79,404 for the year in net earnings.
The data showed that direct residential investors tend to be professionals – especially those in managerial positions, business owners, and skilled tradespeople. 27% were self-employed, with 19% who are self-employed owner-occupiers.
Where Do They Invest?
The majority of investment goes on existing property, with only 3% of investment spent on construction of new units.
Investment tends to happen across state boundaries, with over half being located in different postcodes to where the investors live. 11% of investors buy properties in states outside of their own state.
Most investors chose rural, regional and small township areas. Many still opted for the property market in metropolitan cities such as Sydney and Melbourne – breaking into the apartment market.
The top 10 postcodes chosen for residential property investment, include Cairns, Mandurah, Torquay, Mackay and Launceston.
What a question. There are millions of reasons to invest in property, including source of potential income, future investment, money burning a hole in your pocket, mid-life crisis and so on.
The bottom line is that making a property investment is nearly always going to have financial motivation at its core. Therefore, it’s important to think carefully about where you’ll be channelling your hard-earned cash.