Intergenerational war!

Source: Paul Coster via Flickr

A couple of years ago I watched a movie called Bright Star which was about one of the most famous of all poets, John Keats. It was interesting to learn that even so famous a poet as Keats died penniless.
 
It’s true that authors such as JK Rowling can turn their writing into a form of franchise and make millions, but most writers (as I know!) don’t make a great deal from it. More’s the pity.

Intergenerational war!
 
Wow! If there is ever a subject guaranteed to get the online media’s blood pumping it is the one covered in this brave article. Tom Whitty, a freelance writer and TV producer came out all guns blazing:

“I’m bemused by the existence of the Foreign Investment Review Board, and the government’s argument that ”foreign investment in residential real estate should increase Australia’s housing stock’.
 
I’m saddened that so many people who are approaching retirement will react to this with a ‘cry me a river’ statement, when they know full well they never had it this tough.”

Whoa! It certainly got the desired response with more than 850 instantaneous comments before Sydney Morning Herald closed off their online commenting function.
 
Baby Boomer viewpoint
 
I thought I’d have some Friday afternoon fun by sending (with a wry smirk) my old man a link to the article along with an appended query: “Is it true your generation never had things so tough?”
 
Ohhh… stand back and light the blue touchpaper! I won’t blog the old man’s response about his younger experiences around Rotherham and the pit villages of South Yorkshire, but suffice to say he disagrees strongly. I suppose that most Baby Boomers would.
 
Never been easy
 
The truth is that life has never been easy and property in high demand areas is rarely affordable.
 
The key point in the article is that Tom is searching for somewhere to live in the inner city of Melbourne, which neatly summarises the great real estate problem in Australia. There are only 23 million heads in this vast country, but a huge percentage of us want to live within close distance of only four major capital city centres. This drives up prices.
 
Property in Australia is very affordable across a wide range of regional centres and outer suburbs, but most of us simply don’t want to live there. From a social policy perspective, the risk is that this attitude turns the undesirable areas into ghettos and crime-ridden no-go zones over time.
 
Will city centres become cheaper?
 
I would suggest that if you are waiting for the desirable suburbs in Australia’s four major capital cities to become cheap, you may be wasting your most valuable asset of all: your time.
 
Being a Sydneysider, I’ll use the example of Sydney, but the trends are similar in all major cities. Back in 2005 demographer Bernard Salt of KPMG carried out a landmark study by the name of Australia on the Move for the Property Council of Australia.
 
What Salt concluded was that with the average size of Australia’s households having declined, combined with a booming population, Sydney would need to construct an astonishing 741,000 new dwellings between 2006 and 2031.
 
I don’t doubt for one second that Sydney has the capability to construct 741,000 new dwellings (Melbourne, said Salt, would need 653,000, Brisbane 443,000, Perth 358,000, Gold Coast 191,000, Sunshine Coast 119,000… you get the picture – we need a lot more dwellings). 
 
However, it is highly dubious as to whether Sydney can construct three quarters of a million well-located dwellings with appropriate infrastructure, facilities and transport which people actually want to live in. That’s a key difference.
 
Melbourne is reportedly experiencing this very problem right now. The prices of quality existing dwellings are being forced up while house-and-land packages in fringe suburbs struggle to sell and high rise tower blocks grapple with high levels of vacancy.

A much-used analogy is that “property is like potatoes” – i.e. grow more potatoes and potatoes get cheaper. It’s a theory, true enough, and it may be true to a point, but I’ve never heard of anyone getting emotional over a potato and that’s why it doesn’t quite work as an analogy. Although individually we like to think we are different, humans tend to much more like each other than we care to admit, which is why we are drawn to the same popular suburbs.
 
First world problems
 
The good news for Aussies is that interest rates have been much lower for the past two decades following a structural shift to lower inflation and cheaper credit. This means that repayments on new housing loans remain at levels that are on average affordable at present when measured against our disposable income.
 
The bad news is that with lower interest rates and a booming population, inevitably inner and middle-ring suburb capital city prices have moved higher. Saving a deposit is not easy, particularly if you choose to live in the centre of some of the world’s more expensive cities.
 
Moreover, our consumer culture has raised our lifestyle expectations beyond all reasonable measure. 

Expenses which were once considered frivolous (or were not even considered at all) such as overseas travel,  restaurant meals, cellular phones, and so on are now considered by many to be essentials.
 
As we tend to compare our experiences with our immediate neighbours, we tend to believe that life is tough, but the truth of the matter is that the definition of ‘tough’ is always relative.