'Accidental inventors' are expected to increase

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Around one-fifth of property investors may have started their portfolios “by accident” and these cases are likely to proliferate, according to MCG Quantity Surveyors.

Mike Mortlock, managing director of MCG Quantity Surveyors, said the company’s data showed that almost 23% of landlord clients became property investors simply because they opted not to sell their home when it was time to move on.

“Many of these owners seem to have fallen into their first investment, rather than made a strategic decision to become a landlord,” he said.

Mortlock found the result notable given the broad perception that property investors are a calculating, high-earning cohort who set out to tactically purchase all the available real estate.

According to MCG, 23% of their respondents had lived in their investment property as their principal place of residence, with owners living in their former home for four years and 11 months on average.

Mortlock said this timeframe revealed that only a fraction of these investors were strategic first homeowners who made the most out of stamp duty concessions or grants by residing in their property for the minimum required period prior to moving out.

“Such a group always planned on being investors, but they would be a very small percentage of those in our research, otherwise the average resided-in period would much be lower than five years,” he said.

The number of accidental investors is likely to increase considering the price softening in Sydney and Melbourne. Around 60% of all property transactions in Australia occur in these two capital cities, and homeowners might choose to keep their old homes as an investment because their target sale price is now less achievable.

Mortlock said that the increase in accidental investors could also have extensive political implications.

“Most of these landlords own just one property and are mum-and-dad style investors looking to get a financial step up before retirement. It’s this group who will be most impacted by any future changes to negative gearing and capital gains tax, or upward movements in interest rates. In our experience, those with the largest property portfolios are the least likely to care about negative gearing or tax changes because they tend to be positively geared,” he said.

Data from the Australian Taxation Office showed that fewer than 20,000 Australians have an interest in six or more investment properties.

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