More residential investors cash flow negative

The compliance program of the Australian Taxation Office has disclosed that “the percentage of investors reporting losses on rental investments continues to grow”, which may be another way of saying that an increasing percentage of home loan borrowers with investment properties lack the rental revenue to pay their loans. The tax data may simply reflect the fact that taxpayers still don't understand the rules and are busy expensing renovation expenses rather than depreciating capital improvements as the tax law requires. On the other hand, the ATO's observation may be a clue that credit quality in residential property lending is on the wane.