Friday, 16 June 2023

Resentment is Building

 

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The only thing that can happen is happening. People are becoming increasingly resentful of the prosperous. It is probably hard to get across how un-Australian this sentiment is. Australians are a relaxed and laid-back people. Australia has always been the land of plenty, the land where people could succeed and even become wealthy if they worked hard enough. The kind of country where everybody believed they had a fair go, because they had kind of experienced that and grown up in a society that offered that. It has always been a country where people felt that if they could not succeed in one area they could always move into a different area and have a chance of success there. The problem is less and less people are feeling this way now. Resentment is building, and this is the only way things can go, if the situation does not change.

Houses and asset prices have been driven out of reach of the average income owner. It is now necessary to either earn a very high income, or to have a two-income family who both have relatively high incomes that together make a very high income. Without this kind of upper middle class wealth, it is almost impossible to get into the housing market anywhere within a reasonable distance from the centres where most people work. But despite how many people are facing these kinds of struggles, not everyone is facing hard times, some people are doing incredibly well it in this market.

Those with the highest per-capita wealth and asset ownership are smiling while interest rates go up. Every rate rise increases the value of their savings, and removes more and more young families out of competition for buying the increasingly expensive houses on the market, and the data bears out that this is the precise effect this is having:

“Older Australians 'immune' to rate rises bought a quarter of properties sold in NSW, Victoria and Queensland without mortgages in 2022.

More than 25 per cent of homes sold in Queensland, Victoria and NSW last year were bought in cash by older Australians who have benefited from high property prices and are "basically immune" to the effects of rising interest rates, highlighting a "generational divide" in the housing market.

New research published by property insights group Property Exchange Australia (PEXA) found that $478.6 billion of residential property was sold in 2022, with $122.5 billion worth of property paid for in cash…

… PEXA's head of research Mike Gill said the majority of cash purchases were by older Australians who are retiring and looking to downsize, and have benefited from high house prices.

"They've probably sold a family home, and obviously benefited from increase in pricing over the last few years at least, and then they've used the proceeds of that to then fund the next property," he said.”[i]

There are young families who are trying to work out if they can afford their home, whether or not to rent a room out to a family member or stranger, or to add a second, third, or fourth income to their household to pay the bills. They are delaying marriage, delaying parenthood, and making all sorts of sacrifices, and some are facing living in caravans just to afford to live. While at the same time, older Australians are choosing whether to live in one of their three or four homes, or spend a month in the caravan at some coastal camping ground, just because they can. Resentment is building at how many older and wealthier Australians are doing so well, when most everyone else is struggling.

Others are noticing this too.

“Hot chips. I just can’t say no. Why have one when I could have two, three or more? If I had my way, I’d eat them for breakfast, lunch and dinner and still come back for more.

The trouble is, they would eventually kill me.

Property is our national, collective bag of chips. For a privileged group, property has become an addiction that’s getting worse by the day. Why settle for one house when you can have two, three or more? On top of the family home, why not get an apartment to rent out, and another for summer vacation? And why settle for something small when you can have something bigger, if not to start with, then when you are ready for that next extension?

I call them MMOOYBYs – those who want to Make Money Out of Your Back Yards.

During the pandemic, the nation experienced a building boom on a scale not seen before. We not only broke records for new dwelling construction, we smashed it for renovations, too. Despite all that new supply, prices and rents went through the roof when Economics 101 would expect the opposite to occur, especially as overseas migration fell through the floor.

We have been building vastly more dwellings than are needed to match population growth for decades, yet real prices and rents keep growing, affordability keeps falling, and ever-increasing government subsidies can’t keep up. We currently have 1 million more houses than households.

And all this because of the MMOOYBYs, who just don’t know how to stop.”[ii]

The writer of this article then goes on to suggest multiple different policies that could be instituted to turn this around. There really only needs to be two things done though; decrease immigration and decrease how many homes people can own and not be taxed heavily. These two policies will drive the wealthier home owners to sell their homes and increase the supply for the existing population, and drive prices down over time. The author of the above article suggests other policies, like getting rid of negative gearing and other land taxes on extra homes. These are not terrible ideas, but just lowering immigration would have a better effect.

But either way, resentment is building and people are noticing this. People are starting to push for change. Australians are starting to become comfortable with suggesting increasingly radical policies to solve the housing crisis. The truth is, relatively speaking to other parts of the world, Australians have never really experienced true hardship, they have never experienced the bottom end of society being exploited so heavily that they cannot get relief, and the wealthy being able to lord this over them. Australia has never been a class-based society that has been divided so distinctly along wealth and status lines. But it is increasingly becoming this. Australia is creating a landed class, that has incredible political wealth and power, that is reaping the financial harvest, while their kids and grandkids struggle to hold their heads above water. Resentment is building. Because the country that was once the land of a “fair-go” where every humble family had a chance to own a home is no longer like that. It is now increasingly the land of the indebted, the bonded and the tenant.

Part of having a stable political system is people believing it serves them, and their interests relatively well, but most Australians are starting to become disillusioned on this. Something needs to be done soon, otherwise the stable, relatively free and prosperous life we enjoy here in this wonderful land, might start to fade out of reach of the majority, and when that happens resentment can go in any direction.

Is anybody listening? Is anybody paying attention to this?

List of References


[i] Kate Ainsworth, 2023, “Older Australians 'immune' to rate rises bought a quarter of properties sold in NSW, Victoria and Queensland without mortgages in 2022” https://www.msn.com/en-au/money/markets/older-australians-immune-to-rate-rises-bought-a-quarter-of-properties-sold-in-nsw-victoria-and-queensland-without-mortgages-in-2022/ar-AA1cfWht?ocid=emmx-mmx-feeds&PC=EMMX01

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