Two thirds of property investors struggling with negative cash flow, survey finds
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Nearly 65 per cent of Australian property investors are experiencing negative cash flow, requiring additional funds to cover mortgage repayments and property expenses, according to new research.
The 2024 Property Investment Professionals of Australia (PIPA) Annual Investor Sentiment Survey has revealed a significant increase in financial pressure on property investors compared to last year.
The figure represents an 8 percentage point rise from the 2023 survey, which found 57 per cent of investors were in negative cash flow positions.
PIPA Chair Nicola McDougall said the results highlighted the financial strain on investors during the current high interest rate environment.
“There has been much conjecture and commentary about investors somehow cashing in from higher rents over the past few years, but this data shows that most investors need to tip in additional funds to keep their properties financially above water,” Ms McDougall said.
“Interest rates remain significantly higher than they were a few years ago and while rents have risen, they are a drop in the ocean compared to higher lending costs.”
The survey also found that 57 per cent of investors contemplating selling in the near future would do so because of higher holding costs.
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A breakdown of the data showed negative cash flow was reported by 67 per cent of investors who own one property, 72 per cent of those with two properties, and 66 per cent of investors with three properties.
According to the Australian Tax Office, 71 per cent of investors own just one dwelling, 18 per cent own two, and five per cent own three.
Most investors don’t expect their financial situation to improve soon, with approximately 60 per cent of single-property investors anticipating negative cash flow for at least five years.
“About 60 per cent of respondents who owned one investment property indicated they were expecting to be negative cash flow for at least five years, including 13 per cent who believe it will take at least 10 to 20 years or more,” Ms McDougall said.
For investors with two properties, 54 per cent expect to remain in negative cash flow for more than five years, while 47 per cent of three-property investors forecast negative cash flow for at least five years.
The survey also revealed that 42 per cent of respondents reported tight cash flows, with a further 11 per cent indicating that their employment income wasn’t covering the shortfall, forcing them to draw on savings.
“It’s clear that investors and tenants are both struggling in the high property cost environment at present, however, investors are often doing without to ensure they can cover the shortfall between the rent they receive and the high costs associated with owning one or two investment properties,” Ms McDougall said.
The findings come as the federal election campaign gets underway, with PIPA using the results to remind politicians about the financial pressures facing property investors.