Low-income Australians turn to negative gearing
The proportion of low-income households with a second mortgage has more than doubled over the last decade.
A report by KPMG has revealed a rising number of low-income households taking on negatively geared property investments. The growth in property investments among the bottom fifth of households by income has grown 8.5% per year over the last decade, a rate The Australian reports is more than four times faster than the other 80% of households.
"It seems that once you're hooked on the drug of investing in property, you want more and more," KPMG chief economist Brendan Rynne told the Sydney Morning Herald.
Rynne argued that any increase in interest rates could lead to “serious problems” for low-income households who hold negatively shared property investments.
“While it is perhaps understandable that the poorest members of our society want to diversify and increase their incomes, this group is the least able to take on the financial risk associated with geared investment activity,” Rynne said.
He warned that, should house prices fall significantly, the poor would be impacted along with wealthier households.
“It is clear from our analysis that if the bubble does burst it will not just be the better-off who will be directly affected, the poor will be too,” he said.
The report also found 1.4 million Australian households, around 10-15%, were consistently unable to pay bills and debts as they fell due. Furthermore, 460,000 households, around 3-5%, were unable to afford basic necessities like heating and meals, and had to pawn possessions and seek welfare assistance. KPMG said the number of households in this category had grown by around 94,000 since 2000.