Latest news with #ReserveBankofAustralia
News.com.au
11 minutes ago
- Business
- News.com.au
Huge profits as 20-year home move expires
There's a significant new trend in property investment: for the past three years, a majority of Australian investors have been positively or neutrally geared. That means their rental income has met or exceeded their expenses, including loan repayments. As a result, they've been pocketing extra income each year on top of any capital gains. This is a significant shift given the previous 20-year trend of most investors being negatively geared. The trend is revealed in FY23 tax data released by the Australian Taxation Office (ATO) last month. Based on all our tax returns, the ATO reports there were 2,261,080 Australians with an interest – either sole ownership or joint or part-ownership – in one or more rental properties in FY23. Among them, 51% – or 1,143,905 – reported net positive or neutral rental income. This is the third consecutive year in which more investors came out ahead after expenses. In FY22, 58% of investors reported positive or neutral net rental income. In FY21, it was 53 per cent. This follows a two-decade history prior to FY21 when the majority of investors were negatively geared each year. The fact that interest rates were at record lows in FY21 and FY22 is the most obvious reason why more investors were positively geared in those years. But what about FY23? The Reserve Bank of Australia raised interest rates 10 times (albeit from a low base) in FY23. The cash rate rose rapidly from 0.85 per cent to 4.1 per cent between July 2022 and June 2023, and yet most property investors remained positively geared. How is that so? I think several factors are contributing to what I hope might become a lasting trend. The biggest one is a huge surge in weekly rents that began in FY21 and continued into FY22 and FY23. Data shows annual rental growth of about 7 per cent in FY21, 9 per cent in FY22, and another 9 per cent in FY23. Additional rental income would have certainly offset the impact of rising interest rates in FY23. (The pace of rental growth has since slowed but remains above inflation, with annual increases of about 8 per cent in FY24 and 3.4 per cent in FY25.) Another contributing factor is the ageing profile of property investors. According to the data, the largest cohort of Australian investors are aged 60 years or older. The FY23 data shows more than one in four investors, or 27 per cent, are in this age group. This is relevant because older people typically have more wealth, after a lifetime of work and decades of owning their homes, and therefore have more scope to pay down investment debt. Retirement would also provide a new motivation to pay off debt, as would turning 60, since that's when many Australians can access their superannuation in a lump sum under certain conditions. Additionally, a rising number of baby boomers have been downsizing in recent years, which is freeing up funds to pay off loans or fund the purchase of a new property investment with cash. Owning property mortgage-free virtually guarantees strong positive cash flow, since loan repayments are by far the biggest cost for most landlords. I'm also mindful that since the pandemic, we have seen a significant trend in investors choosing to buy cheaper properties with higher rental yields in regional areas or investing in capital cities in states or territories that are more affordable than Sydney and Melbourne. This may also be contributing to the trend in more property investors being positively geared. Affordability is a key driver of this trend, but the pandemic also facilitated it. Lockdowns led to rapid changes in the industry, including enhanced online marketing tools and the provision of private inspections via video. Documentation like loans and property sale contracts went digital, making the financing and conveyancing processes more streamlined, and reducing the barrier of distance. I also think more investors are employing buyers' agents to do all the legwork for them, and this helps people access other states and territories to diversify their portfolios. Buyers' agents are readily available across the country, so investors can buy in the best-performing markets with confidence. For example, there is plenty of anecdotal evidence that East Coast investors have been buying in both the capital cities and regional areas of Western Australia and Queensland over the past few years. These states have been among the top performers in terms of home value growth for several years now. The best thing about more property investors being positively or neutrally geared is that it makes it easier for them to hold on to their investments for the long term. The real wealth from property investment comes from capital gains, and we know that the longer you hold your investment, the higher your capital growth is likely to be.
Business Recorder
13 hours ago
- Business
- Business Recorder
Australia shares dragged by miners, banks; investors await inflation data
Australian shares slid on Tuesday as miners and financial stocks weighed on the benchmark, while investors await the local inflation data due on Wednesday. The S&P/ASX 200 index dropped 0.3% to 8,672.8 points by 0040 GMT. It had closed 0.4% higher on Monday. The domestic quarterly inflation report is likely to provide guidance to investors on whether the Reserve Bank of Australia would tilt towards a rate cut at its meeting next month. The last rate cut was in May, when the central bank lowered it by 25 basis points to 3.85%. On the Sydney bourse, investors tread cautiously with heavyweight financials spearheading a dip in equities. The sub-index fell about 0.7% to record its steepest intraday percentage fall in a week. The country's 'big four' banks were down between 0.8% and 1.1%. Banks boost Aussie shares higher; investors brace for corporate earnings Miners slipped as much as 0.9% to their lowest level since July 21, and were set for their fourth straight session of losses as iron ore prices tumbled. Minerals producer Liontown Resources shed over 1% after reporting a sequential drop in its quarterly revenue. Gold stocks piled on the losses, falling about 1.4% to hit their lowest level since July 9, as bullion prices took a hit following the U.S.-European Union trade accord that lifted the dollar and risk sentiment. Bucking the trend, however, were energy stocks that rose 0.6% as oil prices extended gains, lifted by hopes of improved economic activity after the U.S.-EU deal. Woodside Energy rose 1.3% to hit its highest level since June. Separately, the company said it will take over operatorship of the Bass Strait oil and gas assets from ExxonMobil, unlocking an estimated $60 million in synergies. New Zealand's benchmark S&P/NZX 50 index fell 0.2% to 12,882.22 points.
Mint
18 hours ago
- Business
- Mint
Australia shares dragged by miners, banks; investors await inflation data
July 29 (Reuters) - Australian shares slid on Tuesday as miners and financial stocks weighed on the benchmark, while investors await the local inflation data due on Wednesday. The S&P/ASX 200 index dropped 0.3% to 8,672.8 points by 0040 GMT. It had closed 0.4% higher on Monday. The domestic quarterly inflation report is likely to provide guidance to investors on whether the Reserve Bank of Australia would tilt towards a rate cut at its meeting next month. The last rate cut was in May, when the central bank lowered it by 25 basis points to 3.85%. On the Sydney bourse, investors tread cautiously with heavyweight financials spearheading a dip in equities. The sub-index fell about 0.7% to record its steepest intraday percentage fall in a week. The country's "big four" banks were down between 0.8% and 1.1%. Miners slipped as much as 0.9% to their lowest level since July 21, and were set for their fourth straight session of losses as iron ore prices tumbled. Minerals producer Liontown Resources shed over 1% after reporting a sequential drop in its quarterly revenue. Gold stocks piled on the losses, falling about 1.4% to hit their lowest level since July 9, as bullion prices took a hit following the U.S.-European Union trade accord that lifted the dollar and risk sentiment. Bucking the trend, however, were energy stocks that rose 0.6% as oil prices extended gains, lifted by hopes of improved economic activity after the U.S.-EU deal. Woodside Energy rose 1.3% to hit its highest level since June. Separately, the company said it will take over operatorship of the Bass Strait oil and gas assets from ExxonMobil, unlocking an estimated $60 million in synergies. New Zealand's benchmark S&P/NZX 50 index fell 0.2% to 12,882.22 points. (Reporting by Adwitiya Srivastava in Bengaluru; Editing by Harikrishnan Nair)
Sky News AU
a day ago
- Business
- Sky News AU
Major overhaul underway that means the Reserve Bank of Australia could deliver rate cuts sooner
Aussies could be delivered quicker rate cuts as detailed data critical for the Reserve Bank of Australia will be published at a higher frequency. The Australian Bureau of Statistics from November 26 will begin publishing a full monthly consumer price index – which measures household inflation. Currently, the ABS only publishes a monthly CPI indicator which examines about two thirds of the goods and services in the quarterly inflation figures. A frequent full CPI would allow the RBA to make more informed cash rate calls - which was a sticking point for the central bank when it controversially held rates earlier this month. RBA governor Michele Bullock said the decision mainly came down to timing as the central bank awaited more details about how inflation was continuing to ease. "By our next meeting in five weeks, we will have the June quarter consumer price index, another labour market reading, further information about international developments and an updated set of forecasts," Ms Bullock said. "So the Board decided to wait a few weeks to confirm that we're still on track to meet our inflation and employment objectives." ABS statistician David Gruen said the bureau began publishing the monthly CPI indicator in 2022 when inflation was rapidly accelerating. 'We thought that there was benefit in providing more up-to-date information,' Mr Gruen said on Business Now. 'At the time, we were only in a position to produce this indicator which updates about two-thirds of the basket of goods and services every month. 'After we'd been producing that for some time, we pitched to the government the idea that we could create a full monthly CPI, that means updating the full basket.' All other G20 countries publish a full monthly CPI and the change will make it easier to compare Australia's inflation to nations with similar economies. Both trimmed mean inflation – the middle 70 per cent of price changes core to the RBA's call – and headline inflation now sit within the central bank's target band. The ABS will release a full CPI for the June quarter on Wednesday where it is expected that trimmed mean inflation will fall from 2.9 per cent to 2.7 per cent. Every major bank predicts the RBA will cut rates when it next meets in August.
Business Recorder
2 days ago
- Business
- Business Recorder
Banks boost Aussie shares higher; investors brace for corporate earnings
Australian shares rose on Monday, led by gains in financial stocks, while investors braced for the start of the local corporate earnings season this week. The S&P/ASX 200 index rose 0.4% to 8,703.7 points by 0049 GMT, putting it less than 100 points below the lifetime high of 8,776.4 hit in mid June. The benchmark had dipped 0.5% on Friday. The earnings season begins this week, with mining major Rio Tinto set to lead the way when it reports its half-year results on July 30. Meanwhile, investors are awaiting the local inflation print, also due on Wednesday, for clues on the Reserve Bank of Australia's (RBA) path for interest rate cuts. On the local bourse, financials rose 0.5%, with the country's 'Big Four' banks gaining between 0.2% and 0.7%. Technology stocks added 0.8%, tracking advances in Wall Street futures after the United States struck a trade deal with the European Union. Gold stocks climbed 1.2%, supported by a 4.7% rise in Bellevue Gold after its strong quarterly production update. Healthcare stocks grew 1.3%, while real estate stocks rose 0.8%, broadly in line with the benchmark. Miners lost 0.4% as iron ore prices fell. Energy stocks shed 0.5%, dragged down by uranium miner Boss Energy, which plummeted as much as 40.3% after warning of higher costs for its Honeymoon project in FY26 due to a decline in average tenor. Among individual stocks, logistics software maker WiseTech Global rose as much as 0.6% after naming chief of staff Zubin Appoo as its permanent chief executive, succeeding billionaire co-founder Richard White. New Zealand's benchmark S&P/NZX 50 index added 0.6% to 12,928.96 points.
