Perth’s new apartment market recorded its strongest quarter of sales since Q4 2021, with 412 apartments sold in Q1 2026 and a record quarterly sold value of $537 million, according to Urbis’ latest Apartment Essentials results.

Urbis said the March quarter result reflects strong, highly product‑specific demand across both ends of the market, from more attainable projects delivering at scale, through to premium stock being absorbed by equity‑rich downsizers.&nbsp;

David Cresp, Partner at Urbis, said the key story in Perth is not demand, it is the market’s ability to convert demand into delivered housing.&nbsp;

“This is the strongest sales quarter since Q4 2021, and it reinforces that demand in Perth is real and it’s local,” David Cresp said. “But the task now is delivery, turning that demand into projects that can actually be built and completed.”&nbsp;

[smartcode_project:default project_id=110291 project_image_fid=302785]

<h2>Affordable product leads, premium demand remains resilient</h2>

Sales in Q1 were led by more affordable projects, with The Boulevard (SKS Group) recording 115 sales in the quarter, the presentation noting this is only the second time a single project has surpassed 100 quarterly sales. The project was able to offer more affordable housing product right next to a train station.&nbsp;

Palmyra West (Finbar) also delivered strong results with 28 sales in Q1, following 84 sales in Q4, with an average price of under $800,000, underscoring depth of demand for well‑located, attainable new stock.&nbsp;

At the premium end, Urbis said downsizer demand is continuing, with the results highlighting Romeo (Applecross, Finbar) recording 75 sales and reaching almost 50% sold in one quarter.

Jual (Shenton Park, Celsius Property) also posted a strong quarter with 28 sales, reaching 39% sold in one quarter.

Urbis noted that Perth apartment demand is not speculative, not investor‑led, and not uniform, describing it as localised, often equity‑driven and highly product‑specific, a pattern reflected in the polarisation between strong “attainable” performers and premium downsizer product.&nbsp;

[smartcode_project:default project_id=148957 project_image_fid=364102]

<h2>Prices underpinned by costs, and the delivery risk is growing</h2>

Urbis said pricing pressure is cost not demand‑driven: construction costs and delivery risk are now a central constraint, with the results noting build costs remain elevated and volatile, and that energy, fuel and labour uncertainty weigh on feasibility.

David Cresp said a growing challenge for private Build‑to‑Sell developers is simply securing a builder in the current environment.

“Developers are really feeling the pressure from a building market that was operating at capacity and securing a builder is challenging,” David Cresp said, adding that even where a builder can be secured, “trying to get to the price that makes the development financially viable is incredibly challenging in the current market.”&nbsp;

Urbis’ broader WA commentary also notes that industry remains at or above capacity with lot and housing creation, and that many builders are limiting new sales to manage stretched workforces and fixed‑price contract pressures, conditions that flow directly into apartment feasibility and delivery timing.

[smartcode_project:default project_id=108869 project_image_fid=317905]

<h2>Supply: improving later, but still constrained, and Perth lags eastern benchmarks</h2>

While near‑term supply remains constrained, Urbis’ forecast shows completions lifting “Supply is forecast to be back above 1,500 apartments per annum for the first time since 2019”, with 1,775 completions forecast for 2026, and volumes remaining above that level over the following years.&nbsp;

Looking further ahead, completions are forecast to reach 2,500 in 2028, with the report noting 32% of that total is social/affordable, reflecting the role of government‑supported delivery in rebuilding the pipeline.&nbsp;

However, Urbis said Perth remains behind comparable markets on pipeline scale. In a national comparison of projects under construction, the report shows under construction Perth Build‑to‑Sell (BTS) at 3,446 apartments versus the Gold Coast at 7,922. Mr Cresp said “The challenge for Perth is how to we grow the delivery pipeline”.

Urbis’ conclusion is that Perth’s market is increasingly defined by product discipline and delivery certainty, with the research identifying “delivery certainty is key” and calling out builder risk and procurement models as core success factors, alongside “timing and staging”.&nbsp;

Joel Robinson

Perth apartment sales hit strongest pace since late 2021 as builder capacity tightens

<a href="https://www.apartments.com.au/developers/sammut-developments">Sammut Group</a> has secured development approval for its latest Brisbane apartment project, marking the Sydney developer’s next step in expanding its Queensland pipeline following the success of its debut Gold Coast development, Coast.

The approved project at <a href="https://www.apartments.com.au/new-apartments/44-glen-road-toowong-qld-4066">44 Glen Road, </a><a href="https://www.apartments.com.au/developments/toowong-qld-4066">Toowong</a> will deliver a 15-storey riverfront apartment building with 42 residences, significantly increasing the scale of the site’s previous approval for a smaller luxury scheme. Designed by Bureau^proberts, the development will comprise a mix of predominantly four-bedroom and two-bedroom apartments positioned to maximise Brisbane River and city views.

Sammut Director Julian Sammut said the group had been actively searching Brisbane for several years before identifying Toowong as the right fit.

“Brisbane was the right step for Sammut,” Sammut said.

“With the success of Coast we thought we should definitely look to do more in Queensland alone. We then pushed up to look at Brisbane. We've been looking for I'd say two to three years actually and it was hard to find the right location.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/f_auto,c_limit,w_1440,q_75/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/field/image/Screenshot%202025-12-23%20at%203.27.14%E2%80%AFPM.png?VersionId=dYAVIL7qdcGA8ojvkslSrLjczXFejSSx" />

Sammut said suburbs including New Farm and Teneriffe were considered before the group ultimately focused on Toowong due to its strong downsizer demographic and limited supply of developable riverfront land.

The site was acquired off-market after what Sammut described as a lengthy negotiation and planning process, with the developer pursuing an uplift to the original approval.

“We are DA approved now which is very exciting,” Sammut said.

“We've had our change approval come through and we've obviously doubled the height, 15 storeys plus rooftop. We've got 42 amazing apartments that are going to be coming to market soon.”

<img alt="Sammut makes Brisbane apartment play" data-entity-type="" data-entity-uuid="" src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,dpr_2.0,q_auto:good/https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202025-12-23%20at%203.27.26%E2%80%AFPM.png?VersionId=ohkRkY0dIZlqdfME2EZePsCQavRiBadE" />

Bureau^proberts said the design responds to Toowong’s evolving urban character, balancing contemporary apartment living with the area’s established residential identity.

“A place where traditional Queensland living has taken place for centuries; Toowong is seeing a shift of contemporary influence, commercial and retail hubs mixed with well-considered residential offerings – all the while maintaining its character and charm,” the architect noted in planning documents submitted to Brisbane City Council.

The architecture practice said the project’s form was shaped by its riverfront setting, flood considerations, neighbouring building scales, and view corridors.

“They said the mix of four and two-bedroom apartments capture the ‘fundamental qualities of Queenslander living,’ translated into the context of a contemporary subtropical building.”

The development sits just off Coronation Drive within walking distance of Toowong’s retail precinct and the upgraded Regatta ferry terminal, while also benefiting from proximity to the incoming green bridge connection to West End. Sammut said the accessibility and amenity offering were central to the site’s appeal.

The approval adds to growing residential activity along the Toowong riverfront, joining nearby projects including Consolidated Properties’ Monarch Residences and Spyre Group’s ARC Residences.

Sammut secures approval for debut Brisbane apartment development in Toowong

Developer Lanevick is heading back into Sydney’s apartment market after focusing more heavily on the luxury townhouse and terrace sector in recent years.

Lanevick, founded and directed by Steve Maroun, is expecting to receive approval in the coming months for a new apartment development in Gladesville, with the aim to launch it to the market later this year.

The 51-apartment project, designed by Studio Johnston, will comprise a mix of one-, two-, and three-bedroom apartments positioned toward the Hunters Hill downsizer market.

“Traditionally it’s been difficult for people in that market to downsize because there just hasn’t been the right product available,” Maroun said.

“We’re targeting buyers who might have 30 to 40 per cent of their house value sitting in the bank after downsizing.

“They still want good spacious entertaining areas, they still want quality design, but they also want flexibility and the ability to enjoy life a bit more after working hard for a long time.”

The project sits near Boronia Park and within close proximity to the Parramatta River foreshore, an area Maroun says offers more of a Hunters Hill lifestyle than a traditional apartment precinct.

“From a lifestyle perspective, it’s really more Hunters Hill than Gladesville,” Maroun said. “You’re close to the foreshore, close to parklands, and still connected back into the village precinct.”

From level four and above, apartments will capture water views&nbsp;toward Sydney Harbour. Communal amenity will include rooftop entertaining areas, wellness spaces, and a gym tailored toward owner-occupier buyers.

“We’ve really designed these apartments around that buyer coming from the Hunters Hill LGA and what they’re actually looking for in their next chapter.”

The proposed development has also been designed to respond to the changing character of the broader Gladesville town centre, where a growing number of mixed-use and residential proposals are expected to emerge over the coming years.

“Gladesville presented a rare opportunity to deliver a genuinely design-led residential project within an evolving lifestyle precinct, just moments from the growing Gladesville town centre, and we’ve approached the project with a strong focus on architecture, liveability and long-term community value,” Maroun said.

Maroun said Lanevick saw a first-mover advantage within the precinct as planning controls continue to evolve to accommodate greater housing density.

“We think there’s a real opportunity there that hasn’t really been serviced properly yet,” he said.

“There’s going to be a broader evolution of the whole Gladesville village precinct over time, particularly with more activation and mixed-use outcomes.”

The Venus Street proposal will include a commercial and retail component at ground level designed to contribute to that evolving streetscape activation.

“A big part of the thinking was how do you activate that area properly and create more vibrancy and amenity, which is what Hunters Hill has been looking for,” Maroun said.

Lanevick’s focus since 2020 has largely been on smaller-scale luxury townhouse and terrace developments. The developer recently completed Royale Randwick, also designed by Studio Johnston, where prices reached $3.65 million. The project was featured in the UDIA NSW 2026 Professional Development Prospectus and was also named a finalist for Development of the Year.

&nbsp;

Lanevick to cater for Hunters Hill downsizers with new Gladesville apartment development

Property developer One Living, backed by former Macquarie banker turned investment manager Chris Green’s investment firm, has unveiled plans to bring more institutional capital into housing to help address the national supply crisis.

The New York-based investor has focused his firm, GreenPoint Partners, on addressing the supply shortage hitting middle market housing in Australia.

It is backing the new One Living business to develop more than 1000 units along the eastern seaboard. The new firm is starting with a development on Mona Vale Road, on the border of Mona Vale and Pymble, in Sydney’s Northern Beaches, with around 140 apartments planned. They are eyeing off more sites across the city.

With cost pressures rising in the industry, One Living’s model is to be a vertically integrated developer-builder, so it can respond directly to the housing gap by removing the cost inefficiencies embedded in traditional residential delivery.

“We are building a platform designed to operate at scale and starting in a market where there’s a clear need for quality, attainable housing,” One Living joint managing director Joseph Scuderi said.

“It’s that missing middle – it’s that attainable end of housing… that’s what most Australians invest into and what Australians can actually afford.”

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="798dfa93-4941-4db6-a696-31e9dc18e81c" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.31.50%E2%80%AFPM.png?VersionId=mKBqi5C_DmeiXS.AtJkcR8LQIxqCqmFi" />

GreenPoint Partners brings years of experience assembling and scaling real estate operating businesses across major markets. And Green sees a big opportunity in Australia.

“For its size, sophistication and importance to the community, Australia’s living sector has remained largely under-institutionalised, which represents significant opportunity,” Green said. “GreenPoint identified that gap, assembled the right team, and is backing One Living to build a platform that is aligned to market needs.”

Green said being a builder-developer would give the company the capacity and flexibility it required to deliver reasonably-priced homes.

“We want it to be at that attainable level; not super high end luxury but at that attainable level,” he said.

<img alt="Mona Vale" data-entity-type="file" data-entity-uuid="74a5344a-4b26-4d4a-ada3-056b1220be77" src="https://s3.ap-southeast-2.amazonaws.com/www.urban.com.au/s3fs-public/inline-images/Screenshot%202026-05-28%20at%202.32.15%E2%80%AFPM.png?VersionId=vY8hXHO4reBMdO8ZXMWCNtGZJofUPQ3j" />

&nbsp;

One Living will undertake a component of affordable housing in its schemes, which it will own and operate, and it could also run build-to-rent on some sites.

Green praised local policy settings.

“The NSW government is being very supportive, strategic and pragmatic in terms of how do we generate more supply of housing,” he said. “We think it’s actually positive for development and the bit that’s been lacking at that attainable level is that it’s lots of relatively small private developers, whereas we want to create an institutional platform.”

One Living is also&nbsp;looking at high-density projects and could take on more institutional funding in the future.

“The way we will be able to achieve economies of scale is through size,” Green added.

One Living enters Sydney's new apartment market with Northern Beaches site acquisition

It's been several years since there's been an opportunity to buy a brand new townhome in Melbourne's coastal suburb of Mordialloc. Even apartment developments in recent times have been few and far between in the area.

Local developer LDS Property identified the gap in new housing, securing a site on White Street, directly opposite&nbsp;Woodlands Golf Club Mordialloc. They've recently launched&nbsp;<a href="https://www.apartments.com.au/new-townhouses/wm-residences-mordialloc-102-white-street-mordialloc-vic-3195">WM Residences</a>, just 13 townhouses which they have already started building.

Projects by Buxton Director Heath Thompson, who is selling WM Residences, says the townhouses x that perfect middle ground be

"Mordialloc residents have had limited options to downsize within the suburb, often forcing them to look elsewhere despite long-standing ties to the area," Thompson says.

"With very little comparable new supply coming to market, projects like WM Residences are well placed, particularly as buyers look to capitalise on current conditions amid constrained supply."

[smartcode_project:default project_id=134646 project_image_fid=6109]

The development, designed by regarded architecture firm&nbsp;<a href="https://www.apartments.com.au/architects/ewert-leaf">Ewert Leaf</a>,&nbsp;adopts a deliberately restrained architectural approach, focusing on simplicity, durability and liveability rather than overt design gestures.

The boutique scale is central to the offering. With only 13 three-bedroom residences, each home is configured to prioritise functional layouts and everyday use, supported by private terraces and secure two-car garages.

Ewert Leaf’s design response leans into a calm, neutral material palette. Interiors are defined by oak flooring, white walls and soft finishes, creating a consistent and understated backdrop. The approach avoids trend-driven detailing in favour of longevity, with an emphasis on natural light and spatial clarity.

[smartcode_project:default project_id=134646 project_image_fid=6110]

Beyond aesthetics, the homes are designed to meet contemporary performance expectations. Each residence targets a minimum 6-star energy rating, incorporating double glazing, comprehensive insulation and all-electric Bosch appliances.

The project’s location supports a walkable coastal lifestyle, sitting within close proximity to Mordialloc’s foreshore, Main Street retail strip and the train station. Local cafés and dining venues, including Suburbia Deli and Hendriks Café, are within a short walk, reinforcing the area’s established neighbourhood character.

[smartcode_project:default project_id=134646 project_image_fid=6116]

While <a href="https://www.apartments.com.au/developments/mordialloc-vic-3195">Mordialloc</a> is often defined by its beach and pier, the project taps into other areas of day to day living, offering easy access to local food, casual dining and transport, rather than positioning itself purely as a lifestyle retreat.

WM Residences reflects a continued trend across Melbourne’s coastal suburbs towards smaller-scale, design-led townhouse developments, particularly on infill sites where proximity to amenity is already established.

With construction commenced prior to its market entry, the project aligns with a growing preference among buyers for developments with visible progress and defined delivery timeframes.

[smartcode_project_cta:default project_id=134646]

WM Residences fills gap in Mordialloc townhouse market

Negative gearing

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There was a silly suggestion the pickup in last weekend's Sydney clearance rate to 59 percent followed Scott Morrison's elevation to Prime Minstership.
But with a dismal 31 percent auction success rate in the Sutherland Shire, that perhaps needs a rethink.
Most economic trends only come after a lag, as the RBA Assistant Governor Luci Ellis recently observed.
But I do expect there will be a sharper focus on housing affordability among politicians between now and the Federal election.
Maybe the next election will even see a marked debate over negative gearing policies unlike the last. 
The recent Federal budget was light on housing initiatives, but Scott Morrison's 2017 budget saw a raft of measures.
Some were pitched at getting headlines, some aimed at long term structural changes, and some pitched as softening demand in what was then a peaking property market, which also happened to help the budget bottom line.
Morrison has been the most attentive to housing affordability of any treasurer in recent times.
He gave a keynote speech last year that noted housing affordability is not a new problem, pointing out, he like anyone in Sydney had actual experience that it has never been easy to buy a home. 
Morrison's first property purchase cost $330,000 with his wife, Jenny, bought in Bronte in 1995, where he grew up as a child, and then they upgraded to the Shire at $920,000 in 2009.
He rightly suggested, dealing with housing affordability must involve a scalpel, not a chainsaw given the likely or even unintended consequences of policy shifts.
He warned declining housing affordability can't be answered with lower economic growth especially as some two million taxpayers have an interest in a residential investment property.
Around 1.3 million of these taxpayers negatively gear, as mum and dad investors put a roof over the head of around a quarter of all renting households in the country.
Morrison has noted the Labor policy disrupting negative gearing would come at a cost, not only for investors but also to the households who rent. 
It was interesting for him to suggest previous governments had avoided dealing with many housing issues "for fear of raising and disappointing expectations."
There are some who argue the long run of low interest rates along with reduced price growth has lessened the need for the provision of negative gearing benefits.
Lower interest rates have cut the cost of money investors borrow and – as a result – the losses being claimed on tax.
But there will be a time when investors will seek out the opportunity.
Taking the prospect of the benefits away will lessen the demand for property.
Labor says its intends to reform negative gearing and the capital tax discount from a yet-to-be-determined date after the next election.
Subject to legislation, investors will likely not be able to use net investment losses on existing properties to offset wage income. And the capital gains tax discount on an investment property will be reduced to 25 per cent.
They have advised the negative gearing changes will be for existing homes, not newly built homes.
It is important to note Labor states that investments and tax arrangements already in place will not face retrospective impacts. 
So I expect there might just be a pickup in investors seeking out the opportunity of buying established property ahead of the election, given the possibility of a Labor win.
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jchancellor-FAypfDUnLy

Labor's negative gearing policy will see investors buy established property ahead of next Federal election

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EXPERT OBSERVATION
Australia’s peak body for property investors, the Property Investors Council of Australia (PICA), is urging all property owners to join a campaign against Labor’s “economically damaging” negative gearing policy by signing its new petition on change.org.
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Labor’s proposed changes to negative gearing and Capital Gains Tax (CGT) will not serve Australia well both economically and socially.
You can’t take away upwards of 30 per cent of buyer demand and expect all property values to hold up.
Ask yourself, who’s going to buy a brand-new property and run it at a loss for several years, if they know these new properties aren’t going to have the buyer demand that they once had?
According to PICA, Labor’s proposed policy changes will have a number of damaging consequences, including: 
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The vast majority of property prices will fall, affecting all property owners – not just investors. 
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Jobs will go – both directly (construction, materials, trades, etc.) as confidence in the sector drops and indirectly (retail, furnishings, finance, etc.) due to the “wealth effect” principal that follows. 
</li>
<li>
The economy will lag significantly – and Labor could be responsible for breaking Australia’s world record of unbroken economic growth by causing our first recession in more than 27 years. 
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Rents will rise as fewer new properties are bought or built to lease – higher demand and lower supply, as our population continues to grow. 
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We would argue to not be misled by Labor’s modelling or anyone’s modelling indicating that negative gearing will only marginally affect property prices across the entire property market.
All the modelling is flawed because it doesn’t adequately take into consideration what we believe will be a big shift in buyer behaviour. A macro reform of this magnitude will absolutely impact buyer behaviour significantly, so much so that it’s very difficult to accurately forecast any realistic model. 
How we base our view on property prices is looking at what investors will do if there is uncertainty about price growth. All you need to do is ask a simple question like, ‘Would you invest in property if it didn’t grow in value, yet you had to pay all the loan interest over the years?’ We all know the answer to that question. 
According to PICA, the one exception to falling property prices in the vast majority of markets will be soaring land values for inner-city land, as well as the risk of over-development in city fringe suburbs. 
Demand for inner-city land will soar as investors opt for quality as well as for development potential as close to the city as possible, which will push up prices.
While PICA is highly concerned about the significant economic risk of Labor’s proposed changes, it wants government to introduce regulation in the property investment industry to better protect consumers.
We don’t support Labor’s proposal for changes to negative gearing or CGT, however we are open to some potential reform to CGT exemptions to encourage long-term investors and discourage short-term speculators into the market 
We want to cooperate with all political parties and regulators to help them understand the importance of the residential property market in developing good sensible and sustainable policy. This is the reason why we have created this petition, as there are many of us who are very concerned and through this petition we can show our concern.
Ben Kinglsey is the chairman at Property Investors Council of Australia.
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jrobinson-rf4aSBido9

PICA launches campaign against Labor’s "poorly constructed" negative-gearing policy

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New data confirms two-thirds of investors who negatively geared property were on taxable incomes of less than $80,000 a year.
The latest tax office data suggests Labor’s policy to amend the widely used property purchasing practice would mostly hit more lower-income earners with only one investment property, according to Treasury analysis of the 2015-16 tax records published in The Australian.
The statistics also included figures on the number and occupations of people affected by Labor’s $20bn plan to scrap negative gearing after the next election on any new purchases of established properties, showing 62 per cent were on taxable incomes of under $80,000 a year.
Click here <a href="https://www.propertyobserver.com.au/images/2018/4/27/who_negatively_gears.jpg" target="_blank">to enlarge.</a>
<img src="https://res.cloudinary.com/dz9xllyip/image/fetch/c_scale,w_580,q_auto:good/https://s3-ap-southeast-2.amazonaws.com/po.images/2018/4/27/who_negatively_gears.jpg" alt="">
The opposition has argued that the move would target the wealthy with multiple investment properties.
However, the data shows that more than 70 per cent of negative gearers did so with only one property.
The Tax Stats are an overview of 16 million income tax returns for 13.5 million individuals, 940,000 companies, as well as superannuation funds, partnerships and trusts lodged for 2016.  
They further reveal that teachers rank behind only company chief executives and senior managers as the largest group of property investors to negatively gear, with 58,000 claiming rental losses on their tax returns.
While 72,000 investors were listed as company executives, 99,000 people claiming rental losses on their tax returns were either teachers, nurses or midwives.
Labor has long rejected claims that lower income earners would be hit by scrapping negative gearing.
It maintains 70 per cent of the value of benefits went to the wealthiest 10 per cent citing analysis by the Grattan Institute.
In the ATO data, out of the professions, surgeons had the highest average taxable income of $393,467, followed by anaesthetists on $359,056, internal medicine specialists on $291,140, financial dealers on $263,309 and psychiatrists on $211,024.
Other medical practitioners came in sixth on $199,590, followed by judicial and other legal professionals on $198,219, mining engineers on $166,557, chief executives and managing directors on $158,249 and engineering managers on $148,852.
According to the ATO, out of nearly 1200 occupations recorded, there were fewer than 100 where women had a higher average taxable income than men — they included receptionists, schoolteachers and beauticians.
"Reports in The Australian on ATO data showing that almost two thirds of investors are on an average income of less than $80,000... affirmed independent research undertaken for HIA by The CIE," said HIA’s principal economist, Tim Reardon.
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“Changes to negative gearing would adversely impact on the housing market, exacerbating the current undersupply of housing and further reduce the efficiency of the housing market.
“This reduction in house supply would also adversely impact on wage growth and GDP.
“Driving investors out of the market will force up the price of renting as nearly 25 per cent ofrental stock is provided by private investors," he noted.
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j.ballantyne1990-6AQqhLzZaK

Teachers at the forefront of Australia's negative gearers: ATO data

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Reforming negative gearing could save the federal government A$1.7 billion without hurting “mum and dad investors”, according to our <a href="https://www.propertyobserver.com.au/https://www.ahuri.edu.au/research/final-reports/295" target="_blank" style="font-family: Tahoma, Helvetica, Arial, sans-serif; font-size: 12.16px;">new modelling</a>, by focusing tax deductions on investors with smaller property portfolios and removing them for richer investors.
Combined with changes to capital gains tax, reforming negative gearing could make the Australian housing market more sustainable and equitable.
<a href="https://theconversation.com/explainer-why-negative-gearing-is-bad-policy-21882" target="_blank">Negative gearing </a>allows investors to claim a tax deduction if their rental income is less than their expenses. It cost the federal government A$3.04 billion in 2013-14, according to our calculations.
Our report <a href="https://www.propertyobserver.com.au/https://www.ahuri.edu.au/research/final-reports/295" target="_blank">also confirms</a> that negative gearing and the capital gains tax discount incentivise housing investors to take on debt. This potentially makes the housing market less stable and crowds out first home buyers.
According to <a href="https://treasury.gov.au/foi/1876/" target="_blank">Treasury modelling</a>, the <a href="https://www.alp.org.au/negativegearing" target="_blank">Labor Party’s plan</a> to limit negative gearing deductions on newly acquired rental housing would put relatively modest downward pressure on house prices. Preliminary <a href="https://www.rba.gov.au/publications/workshops/research/2017/pdf/rba-workshop-2017-simon-cho-may-li.pdf" target="_blank">research from Melbourne University</a> has found that eliminating negative gearing would result in an increase in home ownership.
Nevertheless, there are <a href="https://theconversation.com/the-real-reasons-negative-gearing-on-housing-should-be-phased-out-43529">concerns</a> that reforming negative gearing would <a href="https://www.propertycouncil.com.au/Web/Content/Media_Release/National/2016/Changes_to_negative_gearing_will_put_jobs_and_growth_at_risk.aspx" target="_blank">harm the financial wellbeing</a> of mum and dad investors.
But using data on the distribution of property and incomes makes it possible to differentiate between poorer and wealthier investors, allowing the government to target reforms to cushion the blow for investors on lower incomes.
<h2>Targeted negative gearing reform</h2>
In our example, investors in the bottom half of the income and property distributions could be allowed to claim tax deductions for all allowable rental expenses. Those in the 51st–75th income percentiles could deduct 50% of those expenses, while negative gearing would be eliminated for those in the top 25% of incomes.
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Our modelling of this scenario shows this would save the federal government A$1.7 billion, or 57.3% of the current cost to the budget, each year. If negative gearing deductions were limited based on property values, the saving would be A$1.5 billion (or 48.3%).
Given this reform would be less likely to hurt poorer investors, they would be less likely to withdraw from the rental market than if negative gearing was eliminated. This would also mitigate the impact of negative gearing reform on renters.
<a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2017-04-26/negative-gearing-increasing-house-prices-expert-says/8473374">Most experts agree</a> that negative gearing is <a href="https://theconversation.com/three-myths-on-negative-gearing-the-housing-industry-wants-you-to-believe-54732">linked to housing market activity</a>. However there is no consensus on just how significantly negative gearing <a href="https://thenewdaily.com.au/money/property/2018/01/23/negative-gearing-housing-market/">affects housing prices</a> or <a href="https://theconversation.com/why-rents-will-rise-under-labors-negative-gearing-proposal-59970">rental market activity</a>.
Our modelling does not focus on the impact negative gearing reform might have on the housing market, house prices, rents, or how investors might respond, but our modelling does show the impact of changing who can claim negative gearing deductions, as well as capping it at different levels.
<iframe style="border: none;" src="https://datawrapper.dwcdn.net/CBzl0/3/" frameborder="0" width="100%" height="400"></iframe>
<h2>Who benefits from capital gains tax?</h2>
Our research also identified that the capital gains tax discount has been a significant factor in the growth of negative gearing since 1999, as <a href="https://theconversation.com/policycheck-negative-gearing-reform-58404" target="_blank">investors are able to claim a rental loss but do not pay full tax on later capital gains</a>.
Home owners who also own at least one rental property receive the highest capital gains tax benefits. Our analysis showed this group has an average property portfolio valued at over A$730,000.
These home owners also have an average taxable income of A$82,000 per person, which is more than 250% of the average taxable income of renters (A$31,000).
We modelled some alternative capital gains tax scenarios reducing the discount – which would increase the tax payable on net capital gains. Our calculations show that reducing the discount would lead to higher income earners paying more capital gains tax.
This would reduce the difference between the tax payable by higher and lower income rental investors, and therefore reduce inequities in the current system.
<a href="https://images.theconversation.com/files/209031/original/file-20180306-146666-1ihuc1p.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/209031/original/file-20180306-146666-1ihuc1p.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a> Author provided, Author provided
<a href="https://www.propertyobserver.com.au/https://www.ahuri.edu.au/research/final-reports/295" target="_blank">Our modelling</a> shows benefits of negative gearing are skewed towards more affluent investors in middle age and in full-time employment. Investors aged over 55 or who aren’t in the labour market (those who are unemployed, retired or not working) benefit the least from negative gearing.
We need to change the way we tax housing to create a more equitable and sustainable housing market. But this needs to be done (<a href="https://theconversation.com/treasury-memo-misses-the-real-impact-of-labors-negative-gearing-policy-89765" target="_blank">and communicated to investors</a>) in a way that limits the risk of a shock to the market if investors exit the housing market.
<a href="https://theconversation.com/essay-a-sober-responsible-budget-but-negative-gearing-a-blind-spot-58922" target="_blank">Policymakers have been reluctant</a> to change the fundamental settings of the tax system, but our modelling shows it can be done in a way that limits the impact on poorer investors.
<img src="https://counter.theconversation.com/content/92679/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">The main limitation on this reform is behavioural, determining how investors will react to the effects of tax changes. Housing reform is complex, involving a range of market factors as well as the tax drivers.
<a href="https://theconversation.com/profiles/helen-hodgson-94553" target="_blank">Helen Hodgson</a>, Associate Professor, Curtin Law School and Curtin Business School, <a href="http://theconversation.com/institutions/curtin-university-873" target="_blank">Curtin University</a>; <a href="https://theconversation.com/profiles/alan-duncan-100759" target="_blank">Alan Duncan</a>, Director, Bankwest Curtin Economics Centre and Bankwest Research Chair in Economic Policy, <a href="http://theconversation.com/institutions/curtin-university-873" target="_blank">Curtin University</a>; <a href="https://theconversation.com/profiles/john-minas-448990" target="_blank">John Minas</a>, Lecturer, <a href="http://theconversation.com/institutions/griffith-university-828" target="_blank">Griffith University</a>, and <a href="https://theconversation.com/profiles/rachel-ong-113482" target="_blank">Rachel Ong</a>, Professor of Economics, School of Economics and Finance, <a href="http://theconversation.com/institutions/curtin-university-873" target="_blank">Curtin University</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/negative-gearing-reforms-could-save-a-1-7-billion-without-hurting-poorer-investors-92679" target="_blank">original article</a>.
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Negative gearing reforms could save $1.7 billion

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Labor MPs might be <a href="https://yalebooks.yale.edu/book/9780300122237/nudge" target="_blank">rubbing their hands together with glee</a> at a Treasury memo that shows the federal opposition’s negative gearing policy will have a “small” impact on the property market. But insights from <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2018-01-08/govt-negative-gearing-claims-contradicted-by-official-advice-foi/9309736" target="_blank">behavioural public policy</a>, as highlighted by the 2017 Economics Nobel laureate - Richard Thaler and his colleague Cass Sunstein, tell us that how people respond to this policy will be more about how the government frames it.
<a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">The Treasury memo</a> showed the Labor policy of limiting negative gearing to existing homeowners will have a limited impact as the changes are unlikely to encourage investors to sell quickly. Also, owner-occupiers dominate the housing market and the costs of selling are high.
However, this assumes that people are forward-looking, well-informed, good with numbers and perfectly responsive to new information. <a href="https://global.oup.com/academic/product/behavioural-economics-a-very-short-introduction-9780198754992?cc=au&amp;lang=en&amp;" target="_blank">Behavioural economics</a> shows us that people do not always think so deeply and logically about their choices.
How any changes to negative gearing are sold to us – as a loss or gain, as a one-off or ongoing, in terms of short versus long term costs and benefits – will impact how Australians react.
Most of us aren’t whizzes with mathematics. As Nobel prize winner Herbert Simon <a href="http://diva.library.cmu.edu/webapp/simon/index" target="_blank">has shown</a>, in place of complex mathematical algorithms we use heuristics. These are simple rules of thumb that draw on our intuitions, experience and gut feel.
<h2>Heuristics and biases</h2>
One common example of a heuristic is the <a href="http://psiexp.ss.uci.edu/research/teaching/Tversky_Kahneman_1974.pdf" target="_blank">availability heuristic</a>. This is when we make decisions based on easily available information such as recent events and highly emotive experiences. Our brains work better with narratives and stories than with facts and figures.
Nobel economics laureates George Akerlof and Robert Shiller <a href="https://www.propertyobserver.com.au/https://press.princeton.edu/titles/8967" target="_blank">have applied</a> a similar insight to analyse people’s perceptions of housing market fluctuations. They noted that we hear lots of stories about how house prices are on an upward trend. Via the availability heuristic, we easily remember these emotionally engaging stories, much better than we can remember the dry facts about the history of house price instability and housing market crashes.
This leads us to overestimate the chances of continuing house price rises, and to underestimate the chances of a fall, driving unsustainable house price increases – as witnessed, for example, in the American sub-prime property markets before the global financial crisis.
While heuristics can help us to decide quickly, they sometimes lead us into systematic mistakes – “behavioural biases”. This does not mean that we’re all hopelessly irrational. But for negative gearing it matters how a potential change is <a href="https://www.propertyobserver.com.au/http://science.sciencemag.org/content/211/4481/453" target="_blank">framed</a>, and how that fits into our heuristics and biases.
Most economists (including those at Treasury) <a href="https://www.investopedia.com/terms/f/fungibility.asp" target="_blank">assume</a> that one dollar is a perfect substitute for any other dollar. Whether we save A$100 via a tax break, win A$100 from a scratch card or earn A$100 from working overtime, it makes no difference.
Contrary to this view, behavioural economics <a href="http://faculty.chicagobooth.edu/richard.thaler/research/pdf/mentalaccounting.pdf" target="_blank">has shown</a> that the way we treat money is different depending on the contexts in which we earn and spend it. We have different “mental accounts” for consumption, wealth, regular income and windfalls. We are more likely to splurge money we’ve won from a scratch card than money we’ve earnt doing overtime.
This is another reason why framing is important. How the government frames a negative gearing change will determine the mental account to which we assign it, and therefore how we respond.
If negative gearing changes are considered a one-off hit – the opposite of a scratch card windfall – then property owners won’t worry so much. On the other hand, if the change to negative gearing is seen as an ongoing drain on our incomes, then they will worry a lot.
Another factor that will come into play is <a href="https://www.propertyobserver.com.au/https://academic.oup.com/qje/article-abstract/106/4/1039/1873382" target="_blank">loss aversion</a> – people are much more likely to worry about losses than gains. <a href="http://www.nber.org/papers/w8143" target="_blank">Evidence from behavioural experiments</a> shows that home-owners over-estimate the value of their properties. This makes them reluctant to sell at reduced prices in a falling market.
It also means that Australians will resist negative gearing changes if these are framed as a loss, creating political pressures for a policy u-turn. It is difficult to predict how people might respond, but behavioural economics shows that any ructions might be avoided if the negative gearing change is framed as a gain.
For instance, Treasury <a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">predicts</a> that the additional revenue raised from restricting negative gearing could be up to A$3.9 billion. Therefore, the negative gearing changes could cover more than 80% of <a href="http://budget.gov.au/2017-18/content/bp2/download/bp2.pdf" target="_blank">federal government expenditure</a> on veterans and their families.
<h2>In the long and short term</h2>
Treasury’s <a href="https://static.treasury.gov.au/uploads/sites/1/2018/01/FOI_1876_Documents_for_release.pdf" target="_blank">modelling</a> notes there might be downward pressure on house prices in the short term from changing negative gearing, but that this will be small overall.
But <a href="http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.699.7719&amp;rep=rep1&amp;type=pdf" target="_blank">a range</a> of models and experiments have shown that people are disproportionately focused on tangible, short-term outcomes. For example, most of us find it hard to persuade ourselves to go the gym: the short-term costs are inconvenience and discomfort and the benefits seem intangible and distant. This is called “present bias”.
Recent work in behavioural economics confirms that framing (alongside a range of other socio-psychological influences) has a strong impact on our choices. Framing will determine how we perceive the policy, which mental account we will use to process it and how the various heuristics and biases identified by economics and psychologists will play out.
<img src="https://counter.theconversation.com/content/89765/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1">In the debates around negative gearing policy changes, these behavioural insights have not been highlighted. So perhaps Treasury could have added some psychology, alongside the economics, in arguing that house price falls are likely to be limited.
<a href="https://theconversation.com/profiles/michelle-baddeley-434298" target="_blank">Michelle Baddeley</a>, Research Professor at the Institute for Choice, <a href="http://theconversation.com/institutions/university-of-south-australia-1180" target="_blank">University of South Australia</a>
This article was originally published on <a href="http://theconversation.com" target="_blank">The Conversation</a>. Read the <a href="https://theconversation.com/treasury-memo-misses-the-real-impact-of-labors-negative-gearing-policy-89765" target="_blank">original article</a>.
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Gain or Loss: Treasury misses the behavioural impact of Labor's negative gearing policy

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Federal Labor's negative gearing policy would likely have a modest downturn impact on home values, official Treasury documents have revealed.
Contradicting Turnbull Government claims the policy would "smash" Australia's housing market, the previously confidential advice to Treasurer Scott Morrison from his department has been obtained by the ABC under Freedom of Information.
The ALP's plan to restrict the tax deduction, along with halving the capital gains tax (CGT) discount, was an policy difference issue at the 2016 election campaign.
The documents suggest "in the long term, increases in taxation on rental property could have a relatively modest downward impact on property prices."
It also noted as the after-tax returns for Australian investors in shares and property would fall due to the reduction in the CGT discount, households may increase their investment in owner-occupied housing which remains exempt from CGT which "would tend to counter any downward pressure on prices."
After winning a two-year FOI fight, the ABC revealed Treasury officials in early 2016 gave advice to Scott Morrison.
"The ALP policies could introduce some downward pressure on property prices in the short term, particularly if the commencement of the policy coincides with a weaker housing market," they wrote.
The department warned the price impact would be greatest if "uncertainty arising from the policy change itself" compounded any housing market "downturn that may be underway at the time".
The documents also noted Labor's proposal "runs the risk that more wealthy investors will continue to enjoy the same tax incentive benefits they get now, while more modest mums and dads will have to look elsewhere."
The papers advised previous changes to negative gearing (1985-1987) and the introduction of the CGT discount (1999) had little discernible impact on the market, though the housing market itself has historically been highly cyclical and it is "possible that uncertainty arising from the policy change itself could compound upon a cyclical downturn that may be underway at the time."
"Overall, price changes are likely to be small, though the composition of ownership may shift away from domestic investors."
"In the longterm, increases in taxation on rental property could have a relatively modest downward impact on property prices" and "returns for Australian resident investors will fall under the policy," Treasury advised. 
There were <a href="https://www.propertyobserver.com.au/http://www.abc.net.au/news/2018-01-08/govt-negative-gearing-claims-contradicted-by-official-advice-foi/9309736" target="_blank">18 pages in the FOI release</a> obtained by ABC political reporter Dan Conifer and ABC FOI editor Michael McKinnon.
Senior bureaucrats threatened to stop giving honest advice to the Federal Treasurer if negative gearing documents were not kept secret from the ABC.
 
 
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Labor's negative gearing will impact more in a weakened property market: Treasury

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<img src="https://counter.theconversation.edu.au/content/77006/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1">
GUEST OBSERVER
Current market mechanisms need to be reformed to give better price signals to developers, and to direct subsidies to achieve the goal of affordable housing.
Ideally, the reforms would be comprehensive, including road congestion charges, capital gains taxes and negative gearing, tax-advantaged investment, and other measures. But such comprehensive reforms are unlikely. 
Furthermore, general solutions that apply throughout Australia may be unnecessary for problems concentrated in major cities. It is strategic to focus on more incremental, local responses that target problem areas.
A targeted solution
The suggested package of practical measures would be based on a special rate applying to new residential developments in selected urban centres. This strategic intervention is justified by being a form of benefit capture– one that would send more efficient price signals to the market. 
Also, this rate would improve the capability to deliver affordable housing with appropriate infrastructure.
This approach also creates an asset from the flow of future income from the special rate. This reliable income flow will help attract long-term investment by the private sector at relatively low interest rates (government guarantees or tax-advantaged provisions could also help attract investment).
The special rate is levied on the land area of a centre. The total income from the rate is enough to service debt used to fund infrastructure provision, as well as to compensate government for the removal of stamp duty and contributions paid by developers. 
Removing these costs will reduce up-front dwelling prices, and make the market more efficient.
How would a special rate work?
The standard rate per dwelling is set according to a target number of dwellings for the centre. A dwelling target and special rate are then allocated to each site based on its area. 
The allocated rate for a site is apportioned to individual properties at subdivision. A buyer of a dwelling would purchase property with a known obligation to pay the special rate.
If a development has fewer dwellings than its site target, then the average special rate per dwelling will be correspondingly higher. A denser development would have a lower rate per dwelling. This creates an incentive to supply more affordable dwellings at higher density.
Measures to promote transit-oriented development would be complementary. So too with inclusionary zonings that give priority to housing associations or long-term rental investors. 
This proposal could be extended by giving the agency responsible for setting the rate and providing infrastructure the authority to acquire and rezone land, and sell it to developers. This would reduce land costs and risks with gaining approvals. 
Furthermore, land could be sold for long-term rental housing at reduced prices but with additional special rates.
What’s wrong with current approaches?
Currently, no strategic pricing mechanism applies to infrastructure servicing new development. There are either no charges on development or capped ones with providing water, sewerage, drains, public domain and other infrastructure. This means developers do not have to take into account the costs of providing such infrastructure when considering their proposals.
The lack of pricing discipline does not encourage efficiency. This means subsidies, with unpriced resources used, increase with inefficiency. High-cost infrastructure developments get greater subsidies than low-cost ones, and the lower the density, the greater the subsidy per dwelling. This promotes less dense and more dispersed development. 
In essence, current pricing mechanisms are at odds with the policy goals of affordable housing and denser and better-structured urban development. This feeds, in turn, into problems like congestion management, productivity, and economic growth.
Under current arrangements, the wider public bears the cost of subsidies. The criticism here is not against subsidies, but against policies that are not efficient in achieving social objectives. Reforms are needed if markets are to be more efficient at producing affordable housing and improving wider urban outcomes.
Current policies on economic growth and affordable housing presume coherence between them. But this presumption may not be realistic. 
Economic and population growth are accompanied by increased demand for housing. The prevailing policy response is for more-of-the-same, prioritising land rezoning. This would work if it led to reduced demand for the lower-priced portion of the housing stock. This portion of the market desirably should increase with increasing prices.
This is not happening and cannot be expected to happen without some major adverse economic event. Complementary market reforms are essential to achieve economic growth with affordable housing.
The risks of blunt policy instruments
There is also a paradox: even if more-of-the-same policy worked, would it be desirable? Policy based on decreased demand for significant portions of the market may be undesirable as well as unrealistic. 
Price decreases would reduce owners’ equity. They would also reduce the value of mortgages held by lenders, such as banks. In turn, this would reduce the value of lenders’ assets and thus reduce wider lending, affecting the wider economy. 
Policies to reduce oversupply by reducing lending are sensible. However, they create a situation where prices are allowed to increase while significant decreases are prevented. 
Interest rate adjustments are a crude instrument for managing housing markets. Interest rate increases may curtail oversupply in some parts of the market but would exacerbate under-supply in the lower-priced market. 
Furthermore, government concern about perceived housing bubbles may distort interest rate policy to the detriment of the wider economy. Adopting more precise instruments would be strategic.
The proposed measures are complementary to current policies as they promote pricing reforms to make the market more efficient and more effective in producing affordable housing. They are better targeted than wider taxation and interest rate policies, and would make wider economic policy less dependent on housing issues.
Martin Payne is casual lecturer in Planning, University of Sydney and author for The Conversation. He can be contacted <a href="https://theconversation.com/profiles/martin-payne-323295" target="_blank">here</a>.
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Send the market a price signal where affordable housing is most needed

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Those Federal budget announcements affecting property are actually going to have a bigger impact than initially concluded.
Young first home buyers certainly appear willing to dive into the proposed simple superannuation top-up scheme that offers tax breaks. They will likely overtime become the big Budget winners in the housing arena.
The headline housing measure kicks in from July 1 when the first-home buyer can salary sacrifice into their super account above their compulsory contribution.
Regular super remain off limits, but the scheme ought be better than money in the bank, as Treasurer Scott Morrison calculates an accelerated savings of 30 percent.
That is of course unless calamity strikes superannuation as it did in the global financial crisis.
The Budget also offered the elderly an incentive to down-size homes with tax breaks too.
But downsizes are likely to delay the sale of the family home - and not just because the new scheme doesn't start until July 2018.
Individuals who are already 65 have been urged to put off a sale at least until the legislation passes so they don't miss out on the opportunity to top up their super. 
Australians in their early 60s might also delay their downsizing if they are set to become self-funded retirees.
Of course any net proceeds from the sale of the family home will be included in the assets test for the age pension which remains a major impediment for many retirees.
Not much outcry about residential investors losing their travel expense claims when they inspect their investment property. It was good while it lasted most investors have mumbled.
But investors keen to sell their strata units have real concerns as they will be selling their second-hand properties without the attraction of a major tax deduction to the next owner.
Intended to address issues that items such as air conditioners are being claimed as tax write-offs by successive investors in excess of their actual value, it is still not clear just what the government will define as plant and equipment.
The policy intent is to restrict depreciation claims to items purchased and installed by the claiming taxpayer. Investors await draft legislation to see if it extends to say the exisiting communal lifts. 
One commentator says the changes to negative gearing depreciation claims will see investor demand for recently completed housing fall or flatline - resulting in a cooling in the Sydney apartment market price growth.
Another big measure taxing and restricting foreigners in many ways in a revenue treat for the Treasurer in the Budget will impact the market in many ways under the guise of levelling up the playing field for struggling locals.
And no one really knows just how yet that will unfold.
 
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Negative gearing changes worry the property market 

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The Federal Government may yet tinker with negative gearing in next month's budget. 
The most likely scenario would see the introduction of a limit of say two claimable investment properties or alternatively a dollar value cap on how much can be negatively geared by investors. 
There are now a record 2.05 million taxpayer individuals with an ownership interest in a rental property in Australia.
This represents a jump of 348,000 investors over six years, increasing at around 1000 every week.
The latest release of ATO data for 2014-15 tax year show the number of individuals with just the one investment property stands at a record 1.468 million.
Some 383,000 eventually get to two investment properties. 
There are therefore just 10 percent who own three or more.
Less than one percent of investors, or just 19,198, become potential headlines for their triumph by owning six or more property.
Preventing negative gearing from the third property onwards would be consistent with Treasurer Scott Morrison's view that changes to the housing market ought be done in a "surgical" role rather than involving a "chainsaw".
The data release prompts two questions in my mind: Why do Australians typically stop at just the one? How many investment properties do you need?
I have a theory that many Australians are almost accidental investors rather than professional investors.
That is they do so in a rather relaxed way, keeping up with the Joneses, heard it was a god nest egg, but with no intention of getting around to ratcheting it up beyond the one.
These investors often do so after little research, minimal financial services advice, and in their near neighbourhood and often for the use of the extended family as required.
One or two properties is definitely not enough to fully fund your retirement. 
Estate agent John McGrath suggested it could be argued that even six won’t be enough to fund your retirement if you want a good lifestyle.
He recently offered some tips to help figure out how many investments you’re going to need to achieve your goals, by saying the best idea is to work backwards.
"Say you want to fully fund your retirement with $100,000 in passive income.
"Would five properties returning $20,000 per year would work?
"Actually, no. You'll need to pay tax on that income and even if you owned all five debt-free, they’re still going to cost money to maintain."
He pointed out strata levies on five two bedroom apartments in Sydney could easily add up to $20,000 per year.
McGrath noted if you're aiming to fund your retirement, it's critical that your properties achieve solid capital growth.
He said a common strategy was selling half your portfolio to pay off the remaining assets; and you live off the income from those that are left.
This article was first published in the Sunday Telegraph.
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How many investment properties is enough for retirement?

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Limiting how much investors of multiple properties could negatively gear and a possible cap on the number of investor properties has divided the industry even as the government toys with ideas to cool the overheated property market.
The suggestion was favoured by SQM Research managing director Louis Christopher, who said a limit was a good idea “conceptually”, according to Fairfax Media.
The new debate opened up after news broke that the government is examining the possibility of putting a limit on the number of properties investors can buy or impose a dollar value limit on how much can be negatively geared by investors.
Questions around the preferred option hinge on how to find a measure that recognises large differences between property markets around the country and avoids generating new regional or price-bracket distortions, The Australian Financial Review reported, citing sources.
“For those who own 20 properties that are all negative geared, it does need to be done,” Christopher said. “But where you draw the line is political – two properties? Five?
“It’s a very small proportion of the population when you get to three properties plus, and at that point it would only have a small effect [on the market].”
A limit of one property would, however, have an impact on the overall demand from investors, he said.
The government has ruled out dumping negative gearing, and has also shown reluctance to lowering capital gains tax concessions. It has promised a housing affordability package in the May budget.
Experts say the latest idea is not a fix for affordability.
Grattan Institute chief executive John Daley told Fairfax Media that the idea was “genuinely stupid”.
In fact, one of the major problems facing those in the housing market today was not multiple property owners but so-called “mum and dad” landlords with just one investment property, Daley said.
“One of the fundamental problems with the Australian rental market is that it doesn’t have enough multiple property landlords,” he said.
Data from the Australian Taxation Office found slightly fewer landlords in the market but more investment properties per landlord overall.
But a majority of Australia’s 2 million landlords did not have a substantial portfolio – 72 per cent had one property in the 2015-16 financial year and 90 per cent had two or fewer.
Daley said those with large portfolios – such as 10 or 20 investment properties – would be more inclined to offer long-term leases and stability for tenants.
“There are very few big landlords and very few long-term tenancies.”
He said while the idea of portfolio investors helping the market was “counter-intuitive”, it did not make sense to blame housing affordability on a small number of multiple property owners.
BIS Oxford Economics senior manager residential Angie Zigomanis said a cap was not a good idea.
“If someone wants to add more properties to the rental stock, I don’t think we should be stopping them,” Zigomanis said.
Limiting deductions that could be claimed was more effective, as it would “reduce the willingness of an investor to pay top dollar for the property”, he said.
Domain Group chief economist Andrew Wilson said any moves to interfere and reduce investment activity would be a “disruption in the rental market” – whether from altering the tax mix or limiting how many properties investors could buy.
“It would cause higher rents, and we already have a tight rental market,” Dr Wilson said.
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