How many Australians own an investment property? 

And when a topic like this arises, there is usually a lot of focus on the amount of so-called ‘greedy property investors’ buying up all the affordable properties and leaving little for the rest. 

But is that really the truth? 

After all, how many Australian households actually hold an investment property? 

The Australian Taxation Office (ATO)’s recently released statistics reveal some numbers which help to give an insight into how rich property investors really are. 

Home ownership statistics in Australia 

According to Corelogic:

• the number of residential dwellings in Australia has boomed to 10.8 million,  
• with the total value of Australia’s residential market surging from just over $7 trillion before the pandemic to $9.7 trillion. 
• There is a total of $2.1 trillion in outstanding mortgage debt these properties 
• 57.3% of Australian household wealth is held in housing 

New data from the Australian Taxation Office (ATO) supplied to the AFR, reveals that over 20% of Australia’s 11.4 million taxpayers owned an investment property in 2019-20. 

That figure is 14.9% if 3.6 million non-taxable individuals are included. 

That means that around 2.22 million taxpayers in Australia are property investors, and collectively they own 3.25 million investment properties. 

While the number of property investors actually fell for 2019-20 for the first time since the 2007-08 financial crisis, it was by only 333 individuals. 

Here’s how many properties investors hold in Australia: 

• 71.5% of investors hold 1 investment property 
• 18% of investors hold 2 investment properties 
• 9.7% of investors hold 3, 4 or 5 investment properties 
• 0.8% (or 19,895) investors hold 6 or more investment properties 

The data also shows that, while older Australians used to own the majority of investment properties, that has now shifted - today, ‘working age’ Australians dominate when it comes to property investment.  

The top investor age groups are: 

• 24.5% are aged between 55 and 64 years old 
• 22.5% are aged between 45 to 54 years old 
• 21.5% are aged between 35 to 44 years old 
• 12.5% are aged between 25 to 34 years old 
• 12% are aged between 65 to 74 years old 
• 5.5% are aged 75 years old or more 
• 1.5% are aged between 15 to 24 years old 

How much are Australian property investors earning? 

Nothing much has changed over the years. 

The fact that 90% of investors only own one or two investment properties has been the status quo for many years. 

But what I find more interesting is digging into the statistics to see you how much rental income these property investors are earning. 

Of the 2.22 million of property investors, 54% are reported to have been negatively geared during the 2019-20 financial period, claiming a net rental loss for the year. 

That means that Australia’s property investors collectively incurred a $166.5 million net rental loss over the period, the smallest in two decades. 

And the data also shows that investors with fewer properties are more likely to be negatively geared. 

Here’s a snippet from the ATO 2019-2020 data: 

Source: ATO 

Property investment may be simple, but it’s not easy. 

Clearly most property investors failed to build a sufficiently large property portfolio to provide them with a substantial retirement income. 

However, growing a property portfolio will supplement your superannuation and other investment assets to help secure your financial future. 

Of course, the number of investment properties you own is not nearly as important as the quality of your assets and amount of equity you have in them. 

I’ve often said I’d prefer to own one Westfield shopping centre than 50 properties in regional Australia. 

Examining these ATO statistics made me wonder how our clients at Metropole Property Strategists, who have been given strategic advice to guide their investing, have performed compared to the average property investor. 

Currently, Metropole manages over $2 billion worth of property assets on behalf of our clients. 

And, as you can see from the following chart, on the whole, clients of Metropole have significantly outperformed the averages: 

• Only around half of our clients own only one investment property - considerably below the Australian average, but that’s a good thing 
• 21% of our clients own two investment properties, and that’s more than the Australian average 
• Almost 10% of our clients own three investment properties, which is again higher than the Australian average 
• 6% of our clients own four investment properties 
• 3% of our clients own five investment properties 
• 7% of our clients own 6 or more investment properties – more than 7 times the number in the general property investment community. 

We’ve only counted the properties we have bought for clients or that we manage for them.  

This excludes properties clients purchased prior to coming to us, and naturally skews our figures to the conservative side. 

It’s easy to buy the first property, but each additional property added is progressively more difficult. 

We’d like to think our strategic approach to investing has contributed to our client’s outperformance. 

How to outperform the averages and grow a multi-million dollar property portfolio 

The first thing is to recognise that not all properties are “investment grade”. 

Of course, any property can become an investment - just kick the owner out and put a tenant in, but that doesn’t make it “investment grade” - one that grows at wealth producing rates of return. 

The next important factor to recognise is that the location of your property will do 80% of the heavy lifting. 

At Metropole we use a Top Down Property Investment Framework - going from macro to the micro. 

The first step is to start with the big picture and find the right locations, ones that will outperform the averages. 

With the right location on our radar, we can then begin to drill down and apply the 6 Stranded Strategic Approach to select the right properties within those locations. 

This is the property investment system that has helped our clients build a very substantial property portfolio. 

Over the years we have honed our strategies to find that less than 4% of properties on the market at any one time that we like to call “investment grade” properties. 

We define investment grade, as properties that are likely to grow at wealth producing rates of return. 

Let’s look at this framework in more detail. 

1. The right stage of the economic cycle

It starts with buying at the right stage of the economic and property cycle. 

We look at the big picture – how is the economy performing and where are we in the property cycle? 

2. The right state

Then we look for the right state in which to invest – one that is at the right stage of its own property cycle. 

While we are not trying to time the cycle, we do not want to buy right at the peak when we will have to wait longer for capital growth. 

We only invest in our larger capital cities, where there are multiple pillars to the economy – because this is where economic growth and wages growth will continually occur. 

3. The right suburb

Then within that state, we look for the right suburb – one with a long history of strong capital growth outperforming the averages. 

We have found some suburbs have 50-100% more capital growth than others over a 10-year period and obviously, these are the suburbs we target. 

It’s all about demographics, as these suburbs tend to be areas where more owner-occupiers want to live because of lifestyle choices and where the locals will be prepared to, and can afford to pay a premium to live because they have higher disposable incomes. 

In general, they are the more affluent inner- and middle-ring suburbs of our big capital cities, so we will check the census statistics to find suburbs where wages growth is above average. 

Residents in these areas will have more disposable income to spend on upgrading their homes or buying new properties. 

Next, we check out the supply and demand ratio in the area to make sure there is not likely to be a short-term oversupply of properties on the market. 

They say things like: “Oh, this suburb hasn’t had much capital growth – maybe it’s time has come,” or “That’s a brand-new suburb. They’re getting a train line down there so it must grow in value”. 

That is a hunch or gut feel and it needs to be backed up with data and a range of important factors, which we will highlight below. 

4. The right location

Once our research has shown us the suburb to explore, we look for the right location within it. 

Some streets will always outperform others and in those streets, some properties will always be more desirable than others and will outperform by increasing in value. 

Think about the suburb where you live – there would be areas you would happily live in and areas you would avoid, like on main roads or too close to shops, train lines, schools or commercial areas. 

5. The right property

Once we find the right locations that work, we then use the ‘6-Stranded Strategic Approach’ to find the right property within that location. 

6. The right price

We are not looking for a ‘cheap’ property (there will always be cheap properties around in secondary locations). 

We are looking for the right property at a good price. The right property is the one that will consistently perform year after year. 

Interestingly, most property investors start with the price and work backwards.  

The price has to be right but it is not the most important factor when selecting an investment grade asset 

6-stranded strategic approach to buying a property 

At Metropole, we look for the following strict investment grade fundamentals: 

1. Strong appeal to owner occupiers

Not that you plan to sell your property, but because owner occupiers will buy similar properties thereby pushing up local real estate values. 

We also favour locations where a higher number of homeowners live vs investors.  

This creates more predictability and less volatility and risk. 

2. At or below its intrinsic value

That is why we avoid new and off the plan properties, which come at a premium price due to developers' margins, kickbacks and commissions. 

We want to buy below replacement cost/intrinsic value. 

3. With a high land to asset value ratio

A high loan-to-asset value ratio does not necessarily mean a large block of land, but one where the land component makes up a significant part of the asset value. 

This will be an area where more owner occupiers will want to live because of lifestyle choices and one where the locals will be prepared to, and can afford to, pay a premium price to live because they have higher disposable incomes. 

4. A location with a long strong history of capital growth

A known and proven suburb that will continue to outperform the averages because of the demographics in the area. 

Following the top down approach (which we covered above) is how we ensure this. 

5. We look for property with a twist

We do not just look for an average property, but we look for something unique, or special, different, or scarce about the property. 

Something that sets it apart and gives it a higher level of demand from owner occupiers who are willing to pay more for the property in the right location. 

6. Potential to add value

We buy properties where we can manufacture capital growth through refurbishment, renovations or redevelopment rather than waiting for the market to deliver capital growth.  

This can be done upon purchase or in the future. 

By following Metropole’s 6 Stranded Strategic Approach, we minimise our clients risks and maximise their upside. 

Each strand represents a pillar underpinning the capital growth of the property and combining all six is a powerful way of putting the odds in your favour. 

If one strand lets you down, you have four or five others supporting your property’s performance.