Australia’s negative gearing hotspots revealed by ATO data

Australia’s negative gearing hotspots have been revealed, with the data showing investors right across the state were reliant on the tax method as a wealth creation tool – but also issuing a warning that rents could increase as changes to the investment tactic impact the market.

According to Australian Taxation Office figures for the 2023/24 financial year collated by Carlisle Homes, landlords at Williams Landing in Victoria recorded the nation’s highest average net loss for the year at $10,294.

Victoria actually dominated the list.

In second place with an annual net rental loss of $10,259 is Crace in the ACT, just ahead of Fraser Rise in Victoria, where the annual average net loss was $10,054.

The Ponds in New South Wales came in fourth with a $9538 net loss, ahead of Victoria’s Lynbrook, Wyndham Vale, Laverton North in spots five through seven.

Schofields in NSW came in at ninth, with Wollert in Victoria taking out 10th position.

Loan market mortgage broker Tony Nguyen in Northgate – SA’s negative gearing hotspot. Picture: Roy VanDerVegt

South Australian Loan Market mortgage broker Tony Nguyen said there had been a shift across the market.

“We have people who have purchased properties in those suburbs earlier on at a good price point and those suburbs have exploded in price, where they’re now getting into a positive cash flow,” Mr Nguyen said.

“Renters they are finding it much more competitive.

“Rents are obviously going higher just because of how the market is with interest rates, investors are looking to increase those rental prices just to cover the cost of holding on to an investment property, and that’s what’s seen some of them shift from negatively geared to cashflow positive.

“Renters are definitely changing their mindset and we’re seeing people exploring other options and considering other suburbs they would not have considered because of the cost of living pressures.”

Changes to negative gearing are prompting a rethink in investment strategies, experts say.

He said the downside to the changes in negative gearing was people who would otherwise look to sell their properties were holding on to them so they didn’t lose the investment perk.

This kept those properties from the sales market, thereby reducing the amount of available stock for people looking to enter the market of move up or down in it.

Dig deeper into the negative gearing hotspots in your state

Victoria: Victoria warned of biggest negative gearing hit

New South Wales: ATO leaks reveal where gearing reforms will hurt most

South Australia: Adelaide landlords lose $4.5m in top tax hotspot

Queensland: In the red: Qld landlords plunged into $593m black hole

He also said the negative gearing changes had spooked mum and dad investors, but they were still buying.

“A lot of them are purchasing properties in things like trusts and companies which aren’t impacted by the changes.”

The market shift has seen many negatively geared homes shift to becoming cashflow positive. Picture: iStock

Carlisle Homes general manager of marketing Janine Armstrong said the change in some markets from a negatively geared strategy to a positively geared approach showed how sharply the economics of property investment changed as borrowing costs increased.

“Sustained pressure on investor returns can influence investment decisions and rental-market participation, at a time when Australia is already facing significant housing-supply pressures,” she said.

“When interest costs double in two years, the impact on rental property returns is significant. “Rental income may rise at the same time, but for many investors it hasn’t been enough to offset the increase in borrowing costs.

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“The result is an $8.7 billion reversal in collective net rental income over two years, closely coinciding with the RBA’s rate cycle.”

Ray White Annandale agent Tina O’Connor said reforms on negative gearing and capital gains tax, coupled with higher interest, made the climate too uncertain for most buyers.

“There’s just a real reluctance for people to invest at the moment,” she said. “When you don’t know what to do a lot of people just don’t do anything.”

Ms O’Connor at a Stanmore home that had been for sale with a different agent for over $2m, but buyer feedback has since fallen markedly. Picture: Jeremy Piper

Ms O’Connor said a perfect example of the budget’s impact was a house on 62 Albany Rd, Stanmore that was up for auction earlier this year with a different agent. It had been expected to sell for well over $2m, but buyer interest disappeared the day after budget night. Feedback ahead of the new auction is now in the high $1m-mark.

Where the report highlighted the nation’s negative gearing hotspots, it also illuminated the where those positively gearing their properties were making the most bank.

And it turns out landlords in Mullumbimby in NSW are cleaning up, making an average net profit for the year of $11,086 each.

It was followed by Double Bay, also in NSW, where landlords pocketed $9693 profit last year, while Victoria’s Sorrento, NSW’s Rose Bay, and Queensland’s Noosaville rounded out the top five with profits of $9493, $8933 and $8888 respectively.