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New research reveals that the type of homeowner most likely to fall behind on their mortgage are owner-occupiers.
As mortgage arrears rise, owner-occupiers are increasingly feeling the strain compared to property investors, according to recent data from S&P this week. As of June 2024, 1.09% of owner-occupiers were behind on payments by at least 30 days, while only 0.79% of investors faced the same issue.
Experts suggest that investors generally have greater financial resilience, with higher incomes, tax benefits, and the ability to pass on rate increases through higher rents. In contrast, owner-occupiers, particularly those with families, have fewer options to manage the rising costs, making them more vulnerable to arrears.
Changing life circumstances and rising interest rates are among the many factors contributing to financial difficulties for owner-occupiers, and selling a home is a much tougher choice for them than for investors, given the emotional and logistical challenges involved.
In this week’s newsletter, we take a look at both sides of the argument for the abolition of negative gearing, which has been a hot political topic again this week.
The debate around abolishing negative gearing tax benefits for investment properties in Australia has sparked strong opinions on both sides.
Arguments For Abolition
Supporters of ending negative gearing argue that it disproportionately benefits wealthy investors and contributes to housing affordability issues.
Negative gearing allows investors to deduct property losses from their taxable income, which critics claim fuels demand for investment properties, driving up prices and making it harder for first-time buyers to enter the market.
Those in favour also argue that the policy diverts funds that could be better used elsewhere, such as in health, education, or public housing. By abolishing these tax breaks, they believe the government could generate more revenue to address social inequalities and housing shortages.
Furthermore, eliminating negative gearing may reduce speculative investment, cooling down property markets in areas where affordability is a pressing concern.
Arguments Against Abolition
Opponents of abolishing negative gearing, however, argue that it encourages investment in housing, leading to increased rental property supply, which is critical in a market with low vacancy rates.
Many claim that removing the tax incentive could push investors out of the property market, leading to fewer rental properties and higher rents. This could hurt renters more than it helps home buyers.
Additionally, some contend that negative gearing provides a necessary safety net for “mum and dad” investors—everyday Australians using property investment to secure their financial future. They argue that any abrupt changes to the tax system could destabilize the market, harming both investors and renters alike.
Ultimately, the discussion continues, with both sides presenting valid concerns about housing affordability, economic stability, and the future of Australia’s property market.
Variable
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR.
1 Year Fixed
The rates below are based on a $500,000 loan, with the borrower making principle and interest payments with a loan term of 30 years. The rates quoted may vary depending on the borrowers LVR. At the end of the three year fixed period, the borrowers interest rate will revert to a standard variable rate for the life of the loan.
