Posted

Dec 31, 2011

Depends on your perspective

Here's a story from yesterday about the news t

Pure Poison IconHere’s a story from yesterday about the news that house prices in the capital cities have “finally” risen even further out of reach of average Australians:

Capital city house values finally on the up – but only just

HOMEOWNERS have received a bout of good news at year’s end, with a private survey showing the first rise in capital city home values in eleven months.

Let’s ignore for the moment that the source for these sorts of claims is usually those in the industry who profit directly from prices being high, and thus who have a massive incentive to inflate buyers’ and sellers’ expectations of where those prices are going (and who will do and say anything to minimise news that might dampen those expectations), and instead consider the angle these stories – particularly from the media that rely on real estate advertisng – almost always take: that a rise in house prices is “good” and something to be cheered.

Who loses from house prices rising even further ahead of wages?

  • Everyone who doesn’t presently own a house. The entire next generation.
  • Any parents who’d like their kids to move out of home before they’re 50.
  • Renters, because new landlords will have paid more for the rental properties and will pass that on to tenants, thus inflating rents for those in existing properties.
  • Homeowners who don’t intend to sell and move out of the market entirely – inflated prices just push up their rates.
  • Future victims of crime – there’s a long-standing inverse correlation between home ownership and crime – home ownership brings a stake in the local community, and something to lose, and thereby reduces the desire to commit, and increases the penalties for committing, crime. Creating a generation where a much higher proportion of people do not have any hope of owning a house is likely therefore to have the opposite effect.

Who does house prices rising ahead of inflation benefit?

  • Real estate agents on commission.
  • Media who rely on real estate advertising.
  • Those with investment properties – those who’ve chosen to allocate their investment capital away from industries and companies that actually create things and potentially improve our lives.
  • Homeowners who want to use the ability to redraw against their house to build up a bigger debt to a bank.
  • Those who own the retirement villages etc that can charge boomers more now that the houses they’re moving out of are “worth” more.
  • Those who already own their own home who will inherit the leftover assets of their boomer parents.
  • Governments who get to pretend that, on average, we’re all wealthier – because the increased “on paper” wealth of those with houses masks the lower living standards of everyone else.

In other words, there are clearly at least as many losers from house prices rising as there are winners.

Perhaps our newspapers might like to take that into account when reporting these figures. Perhaps report reactions from both sides of the fence. Because there must be an ever-growing proportion of their audience they’re seriously antagonising every time they paint news like this, news that represents a further blow to their hopes of owning a home (or their hopes of their kids finally moving out), as some kind of triumph.

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19 comments

19 thoughts on “Depends on your perspective

  1. ian milliss

    Incidentally here is the broad shape of Australia’s population http://en.wikipedia.org/wiki/File:Population_Pyramid-_Australia_2005.svg just add 5 years to all the ages

  2. ian milliss

    [email protected] Fair enough but I really can’t see this as anything other than the necessary expansion of services as population increases. The biggest demographic hump is not baby boomers but rather the children of baby boomers. The only problem here is chronic underfunding of aged care services and more people surviving into old age (often unwillingly, anyone care to deal with this by reforming voluntary euthanasia laws?) As long as population increases then first the need for child care increases then much further down the line the need for aged care increases. The problem in Australia is that during the time between those two things we changed from a welfare state which attempted to service these needs to a right wing neo-liberal state which treats broad public needs as something to be either vilified or denied if they can’t be exploited. Given the likely catastrophic nature of climate change I feel the whole thing may well be a moot point by mid century.

  3. Matthew of Canberra

    ian milliss @13

    Yeah, ok. I’m sorry for the tone of that previous post. I was in a bit of a foul mood (I actually poked myself in the eye – it still hurts). I pretty quickly regretted the “things will be better when they’re gone” line. That’s obviously not true, and I shouldn’t have posted that.

    Putting my “calm” hat back on:

    I actually do think this IS one of the real issues. Domestically, it’s one of the biggest issues of the next 15-20 years. And I agree that we’re all in it together. But things are going to get a bit tense in the next decade or so. Our national mortality rate will skyrocket (just a back-of-the-envelope scribble says it’s going to double, at least), and it will have significant impacts economically and demographically. It will effect taxation, immigration, health policy, everything. Politically it’s a nightmare, and it’s already being felt at the local council level. And the temptation to pander is clearly too great for one side of politics to resist – see the super tax changes a few years back. CGT will be next.

  4. Matthew of Canberra

    “the post Boomers, gilded youth are incapable & too resentful of the trough having been snatched from beneath their snouts to do such thankless, unpleasant work.”

    Maybe. But I’m not sure why anyone should do something they don’t want to do if there’s another job that they DO want to do that pays better. A lot of it is essentially low-skill work, and in our current economy even low-skill work (cleaning for example) can pay better than retirement homes are currently willing or able to pay. Given a choice (or less choices than I have now), I think I’d personally rather do agricultural work – pick fruit, prune vines and wotnot.

    It’s not dissimilar to child-care, where everyone’s trying to square the circle and find a way to find (and keep) enough staff to meet regulatory requirements while keeping the price down low enough that people are able (or willing) to pay without government subsidies. Fact is, in our current economy, having capable people hanging around looking after things costs real money. Things might change if we can engineer a bit of inequality though … and that’s where targeted immigration might play a part. Pull in some people who’re more desperate for work, expect less money and have fewer choices. Guest workers, in other words.

    You might be right about the “rock and roll” centers. There will no doubt be some premium services for the more cashed-up retirees who don’t have plans to pass it on. We’ll have to wait and see, I guess.

  5. AR

    MoC – you confirmed my point re Negative Gearing screwing renters.
    I the that only reason Oz might need immigrants as “retirement home workers” is that the post Boomers, gilded youth are incapable & too resentful of the trough having been snatched from beneath their snouts to do such thankless, unpleasant work. They will expect their working lives to be based on whirring, blinking screens without ever working up a sweat to, you know, akshally DO things, whether repair their car or clear the gutter of leaves.
    Considering the major wodge of capital, real & cash, the Boomers have cornered, I would expect that some half savvy entrepreneur is already planning rock & roll (or wriggle & writhe) retirement facilities, staffed by hunks for the overpreponderance of females and some nubiles for the few surviving blokes (to hurry up their non survival, nice way to go..), old time muzak – 56-70s before infected by disco & punk, and maybe even a freed up drug menu, go out like Aldous Huxley on a shot of mescaline.

  6. ian milliss

    MoC Yes I’m right and yet you continue to spew out his infantile resentful whining crap about “working to keep the baby boomers in their dotage”. Just grow up, whether you like it or not we are all in this mess together and inter-generational warfare is just another bit of bullshit dreamed up by the tabloid media to keep the gullible in a state of permanent resentment and distracted from the real issues.

  7. Matthew of Canberra

    ian milliss:

    Nice try. No, I don’t blame the boomers. You’re right – they’re just an electorally significant bunch of people who had the good fortune to be born into a boom time, when governments were pursuing pro-growth policies that saw the country borrowing money to stimulate the housing market, mining, agriculture and industry, and amortize the cost of infrastructure in a way that would make us all gag today. And they’ve been (to a great extent) cotton-woolled against economic reforms (at least by the liberals) for most of their lives, because they’re such a significant voting bloc. Whether they be labor or liberal voters, neither side could afford to put them offside while (rather skillfully) dragging our economy onto a competitive footing. By weight of numbers, they’ve been able to ensure their own self-interest for 45 years. The ALP saw the crunch coming, and set in place the superannuation system. The liberals undermined it by changing the tax rules, after stimulated the housing market to win their votes (and I would very much like to see the records of every MP who bought property before the GST and CGT changes were introduced – names and profits, please) And when the time comes, we’ll all be working to keep the baby boomers in their dotage because they’ll have spent the lot. And wow, if we don’t do a good job will we ever hear about it. Both sides of politics will be handing out @%!#jobs for votes.

    And the next big migration take-in will be retirement-home workers. Just watch.

    But their kids are finally paying the price for it. And the country will be a nicer place to be when they’re gone. But it’s not their fault, I completely agree.

  8. shepherdmarilyn

    My mother’s life was better than mine, she retired in good health at the age of 40. She was the pampered princess only daughter of a very well off farmer in the Mallee.

  9. rhwombat

    Marilyn. Rather a lot of fallacies @6.

    The HCV ‘epidemic’ in the Boomers (male > female) is a direct consequence of the fact that it takes a median of 20 years before the complications of acquiring HCV by needle sharing come home to roost, so most of the post Boomers haven’t had a chance to develop the complications – yet. HCV is usually asymptomatic until the complications develop, though a small number of people get ‘auto-immune’ complications, like arthritis or kidney disease during this phase. The HCV epidemic in Australia started in the early 70’s, when escalating injecting drug use amplified HCV introduced by Vietnam era R&R users (strong association of HCV with US army from the US Civil war onwards – mainly because of the introduction of intravenous morphine). That’s why the pre-Boomers weren’t affected by HCV: less IDU, little HCV. Harm minimisation measures (like needle/syringe exchanges) weren’t introduced until the 80’s as part of Australia’s very early response to the HIV epidemic – too late to stop the seeding of HCV into our population. We couldn’t even detect HCV until the early 90’s, and only started to understand to understand the biology and be able to treat chronic HCV in the 00’s.

    As for the increase in autoimmune disease in the Boomer generation – it’s not confined to women, and it most certainly is not due to organophosphates and other ‘toxins’. The persistent residual agents cause acute poisoning, stillbirth, congenital abnormalities and malignancies, not ‘autoimmune’ disease. The increase in autoimmune diseases in all populations (male and female) today is far more likely to be due to lack of exposure to, or survival of, other diseases (like childbirth, infection, smoking & other environmental toxins and the consequences of inheritance, such as coronary artery disease) for long enough to express cumulative risk for immune dysregulation (like lupus) or some cancers. The post Boomers will have this risk too, they just haven’t had a chance to express it yet. They also smoke less, avoid more toxic triggers (like asbestos) and use safe sex and injection practices more than Boomers. They (the post-Boomers) eat, drink alcohol and divorce as much, if not slightly more than Boomers (and lots more than the pre Boomers) but other than being born late enough to suffer the consequences of societal change (eg lack of exposure to too clean environments giving rise to the epidemic of asthma – the hygiene hypothesis), they are just like their parents, and will get their share of chronic disease when they reach middle age.

    I very much doubt that you want to swap your life for your mother’s.

  10. ian milliss

    [email protected] It was utterly immoral of baby boomers to choose to be born when they were and even more immoral for many of them to display the same self centred behaviour as the generations that followed them.

  11. Matthew of Canberra

    … to provide rental property

    And it’s true. It does. It’s actually a stroke of genius – use the market to solve a genuine problem. Trouble is, with high rates of property price inflation, it makes it a heck of a lot easier for somebody who owns a house and wants wants to use their equity to buy an investment property than it is for somebody who wants to buy it to live in. It would be dandy if there weren’t also supply constraints making it harder for the renters to move on. In theory (and currently in practice) the guv will collect that tax benefit at the other end in the form of CGT. But that doesn’t help people wanting to buy a house now. And after the liberals’ little stunt with superannuation a few years back, I wouldn’t be at all surprised to see them change the rules (and chuck away another bunch of money we’ll need to keep those retirees alive) to win an election.

  12. AR

    One of favourite, and most fatuous, justifications for Negative Gearing tax relief from the well padded is that it enables them (sic!) to provide rental property to those too poor to buy. Were it not for that policy, many would not buy-to-rent to off-set their high income tax and thus house prices would fall and… the renters might get to be buyers.
    Can’t be having with that.

  13. shepherdmarilyn

    Hep C is caused by spreading it in blood with needles loaded with drugs, epidemics of it now.

    Auto immune diseases sky rocketing due to more and more toxins like DDT, aldrin, dieldrin and other organophosphates that did not exist when my parents were young.

    And who said they had it easy, I am simply pointing out that we baby boomer women have had it pretty damn tough.

  14. Matthew of Canberra

    sheperdmarilyn:

    … than any other generation.

    Sure, things have improved since we stopped letting companies peddle poison and accepted that the state isn’t going to solve everybody’s problems. But that was already happening before ’45. Try telling somebody born before then that they had it easy. I’m not sure what the thing about hep-c and auto-immune diseases is about. I think polio probably put those in the shade, and rates of depression are only going up now. Every age has its problems.

  15. shepherdmarilyn

    More baby boomers are poor though because many women got stuck with no super, divorces, low paid work and chronic auto immune diseases and things like asbestosis and Hep C than any other generation.

  16. Matthew of Canberra

    We have an astonishingly warped and manipulated property market here – supply is constrained by land releases and inflated labor costs (canberra’s been unbelievable for years – we’re only just starting to see new developments now that are a decade overdue), and demand is stimulated by people using the tax system and low interest rates to snaffle up houses as investments. And it’s clearly very popular, because no government apparently wants to preside over a return to values (or rather prices) somewhere close to free-market basics (which would be probably be seen by most homeowners as a “horrific crash”), so policies are uniformly pro-inflation. About 5-6 years ago, the economist was estimating our property to be around 35% overpriced. I would be surprised if that has changed very much.

    But there will come a time when people wanting to own a home, but unable to because they can’t leverage their parents for a deposit, will become a significant slice of the voting public. And I suspect that it’ll happen fairly suddenly, as the boomers start dropping off the perch (it’ll also be a great time to invest in funeral services – our current mortality rate is going to double or triple pretty suddenly when they start keeling over en masse – and I hope somebody’s figured out where to bury them all, because cemeteries are already finding it hard to place the bods in some cities – sydney’s facing a real burial plot squeeze already. We’ll be stacking them vertically)

    Anyone who is relying on their property value to fund their retirement had better sell up before that happens, because I think there’s going to be very ugly correction. Demographics is going to be critical.

    On the other hand, I’ll be getting a great belly-laugh from listening to all the people who’ve been benefiting from my money inflating their house price suddenly wailing and bitching about how it’s not all going their way anymore (they’re called baby-boomers). They won’t be getting any sympathy from me.

  17. paul of albury

    I think the reason they can sell rising house prices as a public good is that it makes those battling astronomic mortgages more secure if their value rises faster than their debt. Of course you’re right that it’s a vicious circle as it’s what created the excessive debts in the first place.
    And you’ll note that the only point in your first list that applies to the most affluent is the last one about home ownership and crime and the affluent have a vested interest in disbelieving anything that sets them down the path of inequality leading to crime – the answer is transportation more jails, I tells ya

  18. Lord Barry Bonkton

    Half way though the ad , they say 3 states are going backward ? The only time you want to know your house value is when you want to sell , so all these %’s don’t count.

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