The dream of home ownership is turning into a nightmare for the younger generation, writes Frank O'Shea.
A pity beyond all telling
Is hid in the heart of love:
The folk who are buying and selling,
The clouds on their journey above.
You have to pity Generation Y — people a few years on either side of 30, most of them in employment or completing their studies. Yes, they are young, they have good health, an active social life and are at the point in their lives where they are considering starting their own family. But what future do they see for themselves?
If they think about it, the realisation must be hitting them that they will probably never own their own home. And if they are inclined to project their thoughts to the future, they must believe that when they reach retirement age, whatever it will be by then, they will be living in rented accommodation.
At 70, they will still be paying a landlord they may have never met, possibly in China or Mumbai, more likely a trust company for some wealthy family in Mosman or Toorak. Perhaps they hope that there will be a benevolent government who will subsidise their retirement in a high rise with a dodgy lift or, if they are lucky, in some kind of supported community in the far outer suburbs.
The $1,500 they are now paying every month for their flat or share house will have increased by then and, if the current wage stagnation and property inflation continues, it will represent a bigger slice of their income. So they will have been pouring a lifetime of money into a bottomless pit. And because they are beginning to become wise to the ways of the world, they won’t even have the consolation that a percentage of it goes to the government to help run the country, because they know that it is probably channeled through complicated back roads before ending up in the Cayman Islands or Luxembourg - that’s what accountants are for, after all.
Actually, that is not just a cheap shot. Recent figures from the Australian Taxation Office show that in the 2014-15 tax year, 48 millionaires paid no Australian tax at all on earnings of $110 million, but paid accountants and tax advisers over $20 million.
Because Gen Y are bright people, they will be annoyed by figures like those and hope the parliamentarians they elect will do something about them. Unfortunately, that is unlikely to happen and since we are talking figures, here are a few more. Some 96 per cent of members of the Federal Parliament or Senate own property, compared to only 50 per cent of the general population. Put another way, the average Australian owns half a house; the average parliamentarian owns 2.4 houses.
And just under half of those we send to Canberra to run the country have investment properties. So we can hardly expect them to do something about the swindles around negative gearing and the discounts on capital gains tax — the very things that have caused the property bubble.
If Gen Y could manage to sneak in at the floor level of home ownership, they would have to think in terms of ten times their annual income. When they were born, that figure was four times. Their parents were able to buy a house on four times their salary; even though today’s wages are much higher, Millennials would have to pay ten times that wage to buy a house and the figures are even more dramatic in Sydney and Melbourne.
And now, to make things worse, those 2.8 property tycoons we mentioned earlier – the figure for Coalition pollies is higher than for the ALP/Greens who bring the average down to 2.4 – are suggesting that Gen Y dip into their superannuation, destroying the compound interest effect of that system. Moreover, the same 2.8 are proposing to lower the level at which HECS debts are to be paid back, one more hit for Gen Y, but at least it entitles them to expect their parents who got their degrees courtesy of Gough Whitlam, to help out with getting a deposit.
It is true that when their parents were paying off their mortgage, the interest rates were in the high teens, but the idea that you would eventually own your house meant that it was a willing sacrifice. And most mortgages in those times were for 20 years — occasionally 25. The banks are now offering mortgages for up to 40 years and more. We can only hope that Gen Y were awake when their maths teacher explained how compound interest works.
One of the problems for Gen Y is that they are not a recognised voting bloc, like pensioners or farmers or the unemployed. It may be time for them to use modern technology, an area in which they are the experts, to make a nuisance of themselves. In the matter of housing affordability, Australia needs a nuisance right now.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
That's right - the baby boomer generation in Oz is greedy as hell. Millennials can rot.https://t.co/ZUmtz9XcsT— Philip Soos (@PhilipSoos) April 16, 2017
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