You Shouldn't Have To Wait For Your Folks To Die To Buy A House
I recently tried to buy a home for my family. Just the one. To live in. I'm so old-fashioned.
I failed because there was someone else willing to keep borrowing while interest rates are at historic lows. I was already at a figure I couldn't say without frothing at the mouth. The bank manager assured me that most people were borrowing way more, but I felt uncomfortable with all those zeros and stopped bidding. And frothing.
I'd relax and keep renting but, thanks to investors cashing in on the stratospheric Sydney market, we've been forced to move twice in the past three years. That causes its own frothing – looking for a rental, while searching vainly for something to buy, while raising two children, while working full-time...
Yet I'm one of the lucky ones. I can afford to rent. Friends of ours are struggling even to do that. They're the most interesting people we know. They've travelled wide and lived far, but now they're back in Australia and the only reason the wolf isn't at their door is because he can't keep up with all their moves.
Renting With Kids will never be a board game. It's simply not enough fun. But when life becomes a game of Monopoly and more and more families are paying other people's mortgages, we urgently need rental contracts that favour tenants rather than landlords, who already have more perks than you could poke a negatively geared stick at.
I recently tried to explain negative gearing to some of my wife's Italian friends, who are taxed exponentially more on second and subsequent homes. They simply refused to believe that multiple home owners would get a tax break. They thought I'd drunk too much grappa, or my Italian was letting me down. I wish they were right.
Negative gearing is positively absurd, but it's not the cause of the current crisis. We've had negative gearing for years, just as we've had population growth, overseas buyers, speculative investors and a warped idea of the 'value' of owning property.
The lowest interest rates in history have simply poured petrol on the combined fire of all those factors. Cheap money has made property expensive. Singling out negative gearing, or population growth, or overseas buyers, or speculative investors is wasting time in finding a solution.
But who wants to find a solution? Not those with the power to actually implement one, that's for sure. Self-serving politicians, many of whom own multiple investment properties, aren't about to help aspiring home owners out. They're getting richer by the minute. The only thing poor about them is their 'solutions'.
Anyone who tells you that supply alone is the answer is shying from the real question. Addressing supply without pulling other policy levers will merely move the investor feeding frenzy to new pastures. If you're going to build new post codes, they need to be built on level playing fields.
'High-paying jobs', 'The Bank of Mum and Dad'... all the 'solutions' you'll hear from those happy with the status quo fail to address the problem that to get into the market people are borrowing WAY BEYOND THEIR MEANS and that household debt is WAY TOO HIGH.
That's not a solution, that's dereliction of duty.
The high cost of housing is a national issue, so federal politicians should be taking it far more seriously. But it's biting more aggressively in some states, so individual premiers need to roll up their sleeves.
Victoria's Daniel Andrews rolled them up highest, by killing stamp duty for first-home buyers on purchases up to $600,000 and concessions up to $750,000. That was a long-overdue step in the right direction, but with median house prices in Melbourne nudging $800,000, it didn’t go far enough and it didn’t address the fact that young people still have to drown themselves in debt to chance a slippery step on the lowest rung of the ladder.
Ditto New South Wales, where Premier Berejiklian followed Andrews’ lead and offered first-home buyer stamp duty discounts on properties priced between $650k and $800k. In an eyebrow-raising move she also enlisted the help of former Reserve Bank Governor Glenn Stevens, which in my opinion was like giving the grim reaper a resuscitation kit.
Yes, he had the whole country transitioning from the mining boom to think about, and balancing house prices in a few metro hotspots with the economic interests of an entire nation was an unenviable task.
But cutting rates as dramatically as the Reserve Bank did under his leadership, particularly the two cuts in the middle of 2016 (from 2 to 1.5 percent) saw investors scrummage like pigs at a trough and aspiring home owners borrow crazy money to compete.
APRA’s ordering the banks to cut interest-only mortgages has stalled but not corrected the market. But let’s face it, should any sizeable correction occur, the ramifications for those who have over-borrowed would be far worse than the good done to the economy by cutting rates in the first place. Sometimes the side effects of a drug are worse than the original symptoms.
By paying lip service to the problem and failing to at least name, if not address the real cause, politicians have left 'the Australian people' to squabble over who or what is to blame. This has caused a generational dispute involving baby boomers, millennials and posh f**king fruit.
I have genuine admiration for the parent home owners I know who have become asset rich over the past few years but yet who realise their kids are still worse off when homes are out of reach of average people. I'm not sure if they're visionary economists or they'd simply prefer not to have to check for cyanide each time their children make them a cup of tea.
I've never heard so many young people say they won't be able to afford a home until their parents die, and even then it'll have to be split between their siblings. What a delightful conversation. Well done, Australia.
I've also never heard so many young people worrying over taking a gap year, or travelling, or experiencing, rather than plugging into the grid and trying to get the money together for a deposit. What a blinkered bunch of money obsessed people we've become. Our kids need a thirst for worldliness, for knowledge, for culture, for art, for sustainable living... not a fear of missing out on a roof over their heads.
And yet we blame them. We blame them for having unreasonable expectations. We've selfishly conspired to saddle them with a spluttering planet, computers who want their jobs, and driven them into debt to get a higher education. Now if they smear avocado on their toast they are ungrateful swine who have no idea how their parents suffered to 'give' them all this.
No wonder we're all waiting for our parents to die.
I moved back to Australia from England because I disliked the snobbery of a class society. Ten years I was away. Ten years I spent hailing Australia as deserving of its 'lucky country' label.
"You don't have to be rich to live well in Australia," I said to my wife when convincing her that this was the place to raise our family. But after all the moves and all the frothing since we've been back, she is starting to think that I lied to her.
And so am I.