With a personal property portfolio of 55 homes across Australia worth millions of dollars, Sydney-based real estate buyer’s agent Todd Hunter ranks as one of the country’s largest and most successful property investors.
Buying his first property at just 19, by the age of 31 he had already amassed 50 properties using a combination of debt and equity to leverage from one into others.
Now aged in his early 40s, Mr Hunter told The New Daily this week he’s in the market for more property at the right price, in Australia and in the United States.
But while conceding that he “has a few” properties that are negatively geared, Mr Hunter said the vast majority of his housing stock is actually positively geared as a result of strong rental income and low interest rates.
“In the current environment, the debate around negative gearing is actually a bit useless,” he said.
“Rents are holding well or increasing, and with interest rates at 4-4.5 per cent it is actually harder to be negatively geared. The latest statistics show the level of negative gearing is right down.”
Recent data from the Australian Tax Office shows 2,033,901 Australians owned an investment property in the 2013-2014 financial year compared with 1,967,000 in the previous year, but the number of people negatively gearing their property dropped from 1,262,000 to 1,218,488.
The ATO said total claimed losses from investment properties had fallen from $7.9 billion in 2011-12 to $3.7 billion in 2013-14.
“A lot of my portfolio isn’t negatively geared,” Mr Hunter said. But he added that negative gearing was probably more prevalent in Sydney, particularly with more recent investors, who he said may be “slightly negatively geared” due to them having to pay more to buy in as a result of strong price growth.
In many suburbs across Australia, the monthly cost of renting actually exceeds the cost of mortgage payments based on calculations using the median property price for the area and the current average variable interest rate available from lenders. Investors holding such properties are likely to be positively geared.
We examined the median costs of one-bedroom apartments in the inner-city suburbs of Darlinghurst in Sydney, North Melbourne in Melbourne, and New Farm in Brisbane.
In all cases, even allowing for an 80 per cent loan to valuation ratio (the maximum investment loan level allowed by most lenders), the average monthly mortgage repayments were less than the median rents for like properties in the same suburbs.
However we also found that there would likely be a rental shortfall on more expensive properties in the same areas based on median prices, with rental income falling short of mortgage payments.
Meanwhile, according to data from the Australian Bureau of Statistics, Australian governments collected more than $45 billion in tax revenue from property in 2014-15, with NSW and Victoria taking almost half between them. These taxes can be claimed as costs by investment property owners and indirectly feed into the negative gearing debate.
A fiery debate
Negative gearing remains a sore point for many, even though Prime Minister Malcolm Turnbull this week moved to nail shut the negative gearing door by announcing his government will not make any changes to the current system.
Immediately after, co-host of Network 10’s The Project, Waleed Aly, launched a scathing attack on the government, stating the current laws were unfair and contributed to the housing affordability crisis.
But the issue is far from being dead and buried. Opposition Leader Bill Shorten has vowed to completely overhaul negative gearing laws if the ALP is voted in at the next election by restricting tax deductions to new properties only. The proposed changes will not be grandfathered to include properties that are currently negatively geared.