Majority of property investors facing negative cash flow – PIPA

Rising costs force two in three investors to cover rental shortfalls with personal funds

Majority of property investors facing negative cash flow – PIPA

Nearly two-thirds of residential property investors are under financial strain, with most experiencing negative cash flow amid rising costs, new research from the Property Investment Professionals of Australia (PIPA) has revealed.

According to PIPA’s 2024 Annual Investor Sentiment Survey, 65% of respondents said the income from their investment property or portfolio was not covering mortgage repayments and associated costs. This marks an increase from 57% recorded in 2023.

PIPA chair Nicola McDougall (pictured above) said the data pointed to a persistent financial burden for investors, especially amid elevated interest rates.

“There has been much conjecture and commentary about investors somehow cashing in from higher rents over the past few years, but this data shows that most investors need to tip in additional funds to keep their properties financially above water,” McDougall said.

“Interest rates remain significantly higher than they were a few years ago and while rents have risen, they are a drop in the ocean compared to higher lending costs,” she added. “Let’s not forget that the survey also found that 57% of investors who were thinking about selling in the near future would do so because of higher holding costs – the number one reason.”

The survey also found that negative cash flow was most common among investors with smaller portfolios. Of those who owned a single investment property, 67% reported shortfalls. The figure rose to 72% for those holding two properties and dropped slightly to 66% among owners of three properties.

Australian Taxation Office data shows that 71% of investors own just one property, 18% hold two, and 5% own three — a distribution that has remained stable over time.

The survey further explored how long investors expect to remain in negative cash flow. Among single-property owners, 60% believe the situation will persist for at least five years. Thirteen percent think it may take 10 to 20 years or longer to shift back to positive territory. For those with two properties, 54% foresee another five years or more of losses, with 14% anticipating a decade or longer. Investors with three properties showed slightly more optimism, though 47% still expect a five-year deficit, and 11% say it may stretch to two decades.

“Just consider that 42% of survey respondents also indicated that their cash flows were tight with a further 11% indicating that their working income was not covering the shortfall currently, so they were drawing on savings,” McDougall said.

“It’s clear that investors and tenants are both struggling in the high property cost environment at present, however, investors are often doing without to ensure they can cover the shortfall between the rent they receive and the high costs associated with owning one or two investment properties.”  

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