The Younger Generation Are Being Held to Ransom by Baby Boomers and Their "Investments"

adzzz on 20/08/2015 - 00:57

Does anyone else on here feel that the speculative price growth experienced across the country, including the ridiculous amount of wealth transfer happening at the moment between young and old is a significant social crisis facing this country?

I have watched many friends and family members (I am 23) attempt to enter the Sydney property market and purchase properties off mum-dad type investors that have sat on investment properties purchased in Sydney in the early 80's and make an absolute fortune off the proceeds, whilst these younger generations are being forced to borrow ever greater amounts of money to fund the lavish retirement plans of over 50s who are right now on the receiving end of a windfall the likes of which this country has never seen before (think every over 50 who bought more than one property having the equivalent of a Lamborghini dropped in their driveway.

I feel that as a younger person, the interests of these over 50s are so heavily represented in the political and economical policy mix these days that it feels like an artificial barrier has been placed between this generation and the last. The sad part is, this speculative property rise is going to bite our generation harder than any before, and will most likely bankrupt friends and family around me that have taken the plunge and given up "waiting" for prices to go down.

If there is any significant downturn in prices then they will effectively be in the worst financial position possible. Those of us that have held out and waited, will also be likely unable to borrow easily to buy in a depressed market due to all the bad debt and tightening of lending practices that would most likely come from a severe property price correction.

I just personally, can't see any situation where this can end well, and expect that there will be tough times ahead for Gen Y's entering the market and trying to start a family, now and into the foreseeable future. What is your opinion?

Financial

Comments

  • SlickMick on 20/08/2015 - 12:12

    I don't think Australian house prices are expensive per square metre compared to other countries.
    I was recently in Hawaii. Locals there earn a very low wage on average, but property values are priced according to luxury holiday location. Each generation, more people squeeze into the existing family home.

    In US, I get the impression that no-one owns their own homes in major cities - everyone rents?? (I could be wrong.)

    And my observation in general is that Australian's want big homes. I doubt anyone has a higher square metres per person than us.
    If we want cheaper, we should consider smaller.

    • DealzEddy123 on 20/08/2015 - 13:37
      +1

      100% agree. Australians in the big cities discount smaller homes / outer suburbs. Technically they are in Melbourne/Sydney, they just refuse to move there because they're not used to living there / refuse to travel 1.5 hours to work

    • Odin on 20/08/2015 - 19:42
      +2

      One other thing to be aware of, Australia measures square metreage of houses differently to other countries.

      We include garages, attics, basements, and any other area even if it isn't living space. It's rare for other counties to do this. Comparing to the US is especially depressing since they're much, much bigger houses.

    • Flet on 22/08/2015 - 08:47

      If homes got cheaper/smaller the savings on homes would be fed into higher land values, so only benefiting those who own the land, not the new buyers. It would work similarly to the first home owners grants which may have benefited those first in the queue but in reality became first home vendors grants as prices rose with the increase in demand.

  • wal990 on 20/08/2015 - 12:57
    +1

    This is nothing new, Australians overtime will reshape their traditional view on home ownership, and adjust expectations accordingly. No longer can you buy a reasonable property without extraordinary amount of debt. People starting out need to look further out, buy something you can afford now and trade up along the way, that's why they call it a ladder.
    If you think property is expensive now, in 10 - 15 years times you will be laughing as inflation will eat into the prices making them seem like a steal. That is, unless Australia hits like brick wall economically, but if that happens property prices wouldn't be the first thing you'd be worrying about.

    • Cluster on 20/08/2015 - 19:27

      Australians will have to become accustomed to living in apartments. A house with small backyard? Who are we kidding? So many people want to pack into just a few cities in our enormous country that we'll just have to live like people in much of Asia. 1 building with 200 families.

  • airzone on 20/08/2015 - 14:36
    -1

    yawn Gen "Y can't I have everything now!?"… Stop whinging and do something about it. Everyone has it hard, you have to work for it. If home-ownership is what you want, think about how you can get there. Career progression? Cutting expenses?

    • lost69 on 20/08/2015 - 15:15

      HA! Career where? This ain't the US with a pile of states or Europe with a pile of countries you can actually travel to. You have Sydney and Melbourne. Rest are dumps for jobs. And then the jobs vanish with all the visa's. This country is a broken immigrant toilet.

      • ykwon10 on 20/08/2015 - 15:41
        +2

        You are also aware that US and Europe has higher population yea? Employment to population ratio is very much the same between Australia, US and UK. Unemployment rate is similar too. I really do not understand what you are getting at. Immigration in US and UK is higher than Australia by the way.

      • captobvious on 20/08/2015 - 22:35
        +1

        There is money to be made in other oz capital cities that pay a tonne, just have to make the sacrifice and move. You can always move home once you have established yourself. There are a lot of australian expats making a killing overseas… You just need to be skilled.

  • meumax on 20/08/2015 - 17:04
    +4

    Property investors get all the tax breaks. If your outgoings exceed your rental income you're allowed to use the loss to reduce the tax you pay on your totally unrelated wages income. This advantage means you can afford to pay more than owner occupiers for the same property.

    Then when you sell your property, you're only taxed on half the capital gain as opposed to income earned from personal exertion i.e. wages attracts no such discount.

    Note, negative gearing applies to shares as well as property, however only property can be massively geared as banks are willing to lend you at 80% LVR. With the tax incentives in place the government is practically encouraging you to gear up and speculate on property price appreciation.

    If you believe that investors should not be advantaged against owner occupiers, here's how I would fix the system. Allow negative gearing but quarantine the use of the loss credits to other investment income i.e only offsets income from other property, dividends, interest etc. So if you have only loss making investments, you get no benefit. Grandfather provisions so as not to piss off existing investors who bought in good faith under existing rules.

    Remove or reduce the CGT discount to 25%. Or go back to the old 1980's system where you could adjust the gain for the effects of inflation. Grandfather discount provisions for existing asset holders.

    These changes would remove the advantages investors hold over owner occupiers reducing the amount investors are able to bid for a property. Then more owner occupiers would be able to buy a home and investors would be forced to carefully consider their purchases and only buy properties where the investment numbers really stack up i.e. yield must be worthwhile instead of merely speculating on price rises.

    • SaberX on 20/08/2015 - 19:28
      +1

      That suggestion would work except it doesn't fit in with any other investment. If you quarantine rental losses then surely you can't think its fair to not quarantine any other form of investment income?

      In a way the cgt discount encourages those with excess income to invest and reap the 50% gain.

      Your not thinking in tax law either. Your comparing income from salary to selling am investment. Dividend and rental income should be compared to personal income from work.

      Outside your comparing selling an apple tree(capital)as opposed to the fruit it bears (income)

      • meumax on 21/08/2015 - 08:54
        +1

        I see your point SaberX. Income is income no matter the source. Ideologically we should be entitled to deduct legitimate expenses incurred in producing that income be it interest on investment loans or work related travel expenses.

        So why then does deducting losses from investment properties arouse such heated debate yet no one complains about share holders negatively gearing their portfolios?

        I suspect it is because housing is both a social good and an investment asset class. I accept it would be unfair to single out income from investment property but the fact remains the interaction of this tax break with the CGT discount allows investors to bid up the price of properties they want to buy over what an owner occupier with the same financial resources could afford to pay.

        Personally I believe that because housing is a social good, the system must be set up not to unduly disadvantage owner occupiers. If the market will not make this happen the government must regulate it thus.

        Fortunately for the government the market may already be doing this for them. Banks have already put up interest rates for investors. This is just going back to the way things were until the late 80s and is a move I support.

        That takes care of the servicing cost advantage side of investment properties. That just leaves the CGT discount…

        • one man clan on 21/08/2015 - 10:48

          Whilst housing might be a social good, investment in housing does nothing for the economy. It doesn't generate jobs (unless you a building.

        • SaberX on 21/08/2015 - 21:38

          The most equal thing to do is, if you think about it compared to shares is to get rid of the unequal right to leverage up. The only difference between investment classes is this ability to leverage to the hilt, refinance and redo. The hardest issue is you cant undo this in one go: if you limited a 40k deposit to only leverage to 200k loan then no one could buy anything. This is something that should have been phased in slowly over time.

          Likewise if i want to borrow for shares i borrow 20k. I can't put up 10k deposit and borrow 400k and that there is the only real difference in asset classes. Everything else i believe is an emotional bias that shouldnt be assessed e.g. everyone should be able to live the housing dream and own a house as a social entitlement.

        • meumax on 22/08/2015 - 08:20

          @SaberX:
          I don't think leverage is the issue. Both owner occupiers and investors can gear property at 80% LVR. But the taxation treatment favours investors so they can bid more than an owner occupier given the same financial resources.

          I don't think that asking for a levelling of the playing field between investors and owner occupiers is a radical request. It would by no means guarantee everyone who wants it a home of their own. You would still need to work hard. Nor does it presume that home ownership is an entitlement.

          It comes from a belief in fairness, that everyone should have equality of opportunity in the housing market. This is not the same as asking for equality of outcome which some self entitled people seem to be asking for. I.e the cliche of the gen y who wants it all now without working.

          You're right about the emotional bias as well. It is why everyone is so interested in this issue. But I disagree that it is not something that should be assesed. I think it is something worth considering as I believe our Australian culture is important and worth protecting.

  • Cheap Steve on 20/08/2015 - 17:40

    Gen Y has all my sympathy when it comes to house prices. House prices are ridiculous by any historical standard. For a lot of borrowed money you get to live in and fix up a pretty dumpy house. I'm Gen X and was able to buy a nice house in a nice suburb for not a lot of money (by today's standards) through pure dumb luck, just because of the stage of life I was up to.

    However, I wouldn't blame the baby-boomers or tax laws which have been around for 30 years. Blame living in a highly prosperous country with high employment and record low interest rates.

  • StewBalls on 20/08/2015 - 18:23
    +2

    Nice to see that Gen Y isn't coming across as entitled or whiny at all…

    /sarcasm

    • tomleonhart on 21/08/2015 - 08:28

      lol. I'm gen Y and I find this comment offensive!

      • Davros on 21/08/2015 - 08:58
        +5

        Nice whine. I think you just proved his point (-;

        • tomleonhart on 21/08/2015 - 09:14
          +2

          I would like some cheese with my whine!

        • StewBalls on 26/08/2015 - 20:15

          @tomleonhart: Let's not forget tom, it wasn't so many months ago that you were spouting exactly the same drivel as the OP here.

          Sure, you've requested the mods remove the comments now that you're a mortgage broker; coughhypocritecough; but a lot of us remember the disparaging comments you had to say about baby boomers, mortgagors, home owners & landlords.

          You literally were as big a Gen Y whinger as we'll find back then, and I suspect that's only changed now to suit your purposes…so as much as you find that fact offensive, given your own recent vitriol, a lot of us also find your current sanctimony just as irksome.

    • Odin on 23/08/2015 - 13:17

      How dare they complain about being worse off than previous generations! The nerve of them…

      How dare they complain and talk about policy changes that NEED to be made to have a fairer society. How dare they…

      • StewBalls on 26/08/2015 - 19:53
        +1

        How dare they BLAME previous generations!

        Fixed!!!

        Seriously, I know there are always exceptions to the rule, but generally speaking Gen Y are the biggest bunch of indolent whingers & finger-pointing blame-shifters I've ever come across in my life…everything is somebody else's fault. I have an office full of them!

        They are literally a bunch of spoiled brats, mollycoddled by parents & grandparents who worked harder & had it tougher than they ever will…FFS, even the Gen Z young'ns don't piss & moan like they do.

        Pro tip Gen Y, HTFU & get on with life!

        • Flet on 27/08/2015 - 10:08
          -1

          Do some reading and you will see that access to land has become much more costly since the 90s.

          We focus on the effect on first home ownership but the cost of a site to rent or buy is an unavoidable cost for business as well, so the higher the land price and the higher the private debt for housing, the less business and employment and consumption of the goods and services business produces. It depresses the entire economy. Intergenerational blame is a distraction from finding solutions and benefits only the FIRE sector who profit from escalating land price.

          This article provides figures and graphs of the changes in recent decades:
          http://www.macrobusiness.com.au/2014/01/saul-eslake-slams-au…

  • Cluster on 20/08/2015 - 19:16
    +2

    Regarding house price, Joe Hockey's advice was simple. Go and get a better, higher paying job.

    Good, sound advice if one is willing to ignore the fact that modern cities are built on a foundation of low to middle income workers. Sydney and Melbourne CBDs require cooks, cleaners, McDonald's staff, checkout assistants, that guy checking bags on the way out at JB Hifi. If these people take Joe Hockey's advice and upgrade to new jobs, someone else will have to take that position.

    Are workers willing to travel 90 minutes, one way, to work every day? How about 2 hours? Are they willing to share accomodation with 5 other people closer to work? What happens when they want to start up a family and the spouse doesn't have a six figure wage?

    Baby boomers like to pat themselves on the back and congratulate themselves on their investment acumen. The simple truth is much of the Western world has lived through an epic cycle of credit growth over the last 50 years. Unless someone made really terrible decisions, was sick and unable to work, or was otherwise forced out of the workforce, they naturally became wealthy by simple buy-and-hold just about anything investment tactics.

    The other important factor is that a blue collar job in the 1960s and 70s paid enough to buy a house, a car, and support a family. Now the system is stacked against workers with two full time wages required per family. Almost one of those wages goes solely to pay for child care, but it's worth it so the parent (usually the woman) can continue her career. After working for a decade she comes out on top. Just.

    • DeafMutePretender on 21/08/2015 - 02:38

      Good, sound advice if one is willing to ignore the fact that modern cities are built on a foundation of low to middle income workers. Sydney and Melbourne CBDs require cooks, cleaners, McDonald's staff, checkout assistants, that guy checking bags on the way out at JB Hifi. If these people take Joe Hockey's advice and upgrade to new jobs, someone else will have to take that position.

      I guess that's what exploitable below minimum wage foreign workers are for!

    • GnarlyKnuckles on 21/08/2015 - 04:05
      +6

      "Unless someone made really terrible decisions, was sick and unable to work, or was otherwise forced out of the workforce, they naturally became wealthy by simple buy-and-hold just about anything investment tactics."

      Sheesh… this could well be the most jaded load of (demonstrably false) tripe I've ever read on this site!

  • belongsinforums on 20/08/2015 - 19:16

    Unfortunately for them, if Sydney is too expensive to live in, they might have to move elsewhere. My parents moved to a small country town when they started a family. Now it's almost like a city!

  • outofdateyesterday on 20/08/2015 - 19:26

    Move to Tasmania.

    • airzone on 20/08/2015 - 20:59
      +2

      With the added benefit of being able to stay at home with the parents, and start a family with your sister!

  • Bystander on 20/08/2015 - 19:59
    +1

    There is a problem, a huge problem , with the way real estate is dealt with. In days gone by we used to build communities and homes for families. Nowadays real estate is seen as a commodity to be traded for profit.

    I don't blame anyone for taking advantage of legal avenues to increase their personal wealth. Good luck to them. But I do have scathing criticism of the successive governments who have openly and deliberately driven RE prices up because it helps their short term political agenda at the total expense of those who aren't in the market.

    It's dead easy to fix the problem but you won't find either side of our 2 party system wanting to do that.

    • Davros on 21/08/2015 - 08:59
      +1

      "There is a problem, a huge problem , with the way real estate is dealt with. "

      There always is for those that don't have it and want it.
      When you have it your views will change.

      • Bystander on 21/08/2015 - 19:44

        Ha ha. You've read it wrong. It's not envy at all. I've had many properties over the years. The problem is allowing real estate values to balloon way beyond what they're intrinsically worth. It leaves the market in a far more unstable position that is very poorly placed to weather any reality checks.

        People will suffer when the next correction occurs. It didn't have to be this way.

        • Baysew on 22/08/2015 - 15:49

          It's dead easy to fix the problem….
          The problem is allowing real estate values to balloon …

          So what is the solution ?

          New taxes ?

        • Bystander on 24/08/2015 - 20:34

          @Baysew:

          So what is the solution ?

          Focus on supply and demand and costs. The current state of play is that all 3 sides of the equation are distorted by govt policies.

          Fix supply by allowing the market to freely reflect demand. By that I mean rezoning some areas, like transport corridors, to allow higher density development. In other areas release more land for development. In total ensure that there is overall more supply than demand.

          Fix demand by limiting immigration to a sustainable number. Just as the RBA has it's primary responsibility of keeping inflation in a defined band there should be a policy/dept that acts to keep home ownership costs within a reasonable band. The RBA has interest rates as their primary tool to adjust inflation. The "home affordability dept" could have power over the immigration rate to achieve their desired outcome. Back in the 60's the rule of thumb was that an average home would cost something like 3 to 4 years gross wages. There are developed countries today where this is still a reality, USA, Germany, etc. Here in Oz the target could be 4 to 6 years gross wages.

          Fix pricing pressure by replacing stamp duty and section 94 contribs with a land tax. Reduce red tape and processing times for compliant applications. For me it took 2 years and 10's of thousands of dollars to get approval for a fully compliant single dwelling.

          These and others are simple suggestions that could be easily enacted if there was the willpower to do so. Unfortunately we're now completely painted into a corner. There's no easy way out. And both sides of govt recognise this by desperately trying to keep prices rising.

          Interestingly the Liberal party constitution says
          “…in which family life is seen as fundamental to the well-being of society, and in which every family is enabled to live in and preferably to own a comfortable home at reasonable cost, and with adequate community amenities.”

  • [Deactivated] on 20/08/2015 - 21:05

    I grew up in inner sydney. I plan on moving to western sydney when I get enough money together, because of house prices in inner sydney make me cry.

    • Davros on 21/08/2015 - 09:02
      +2

      Nothing wrong with that.
      I couldn't afford a Ferrari as my first car either.

      • [Deactivated] on 21/08/2015 - 11:27

        It's just sad to leave a place I have lived in for over 20 years. I want to stay, because it's closer to work, but beggers can't be choosers!

  • captobvious on 20/08/2015 - 22:19

    First come first serve is the benefit of the BAbyboomers, nothing we can do about it, the next gen will be complaining about the orevious gen and vice versa. Im a gen Y who entered the market when i was in my early 20s, even in the 00s pricing in sydney was high in the area i grew up and wanted to live in (east syd). I was fresh out of uni on a grad wage so i lived at home and saved up but could never save enough of a deposit so what i did instead was bought a couple investments in another city which was low at the time and experienced high growth in a relatively short period and worked out really well. Making lots of equity to finally have enough to buy where i wanted.

    My suggestions from my experience is look at other options as you are not going to get into your dream home the first time. Dont put all your eggs in the same basket. Buy at the lows and sell at the highs. Dont over extend yourself, still have a life and enjoy the sort of things a young person would. Do your research. Some shit places in a good suburb tend to have the most potential especially after some TLC but obviously avoid the problem areas

  • horsome on 21/08/2015 - 01:12

    Just some advice - deal with it!!!

    The sooner you realise where you are at in terms of wealth the sooner you can build it. Your intense jealously of those who own their own homes and investments will do you no favours. You might think you are clever than the baby boomers but give them a break they were not raised on Wikipedia and have worked for decades and earned the purchasing power they have.

    I have been where you are at now. Set me back a fair way and I was miserable performing analytics on monetary and housing policies, a big waste of time.

    I eventually found a very modest home in a bogan area but hey I'm 10mins walk from the beach. Great for my family.

    All I can say is look for bargains they are out there and don't let suburban snobbery get the better of you. If you have to commute 40+mins to work then so be it. It could be a much worse life. And if that doesn't satisfy you then work your way out of it like everyone else!

    • one man clan on 21/08/2015 - 10:44
      +2

      A good way to "deal with it" is to suggest problems with a broken system to those that have the power to change it.

  • [Deactivated] on 21/08/2015 - 12:26

    Some would argue the lack of jobs is the reason why speculative activity is so strong.

    We only have to look at China to see how poor farmers without jobs took out margin loans to speculate.

    As a baby boomer, I reckon one way for Gen Y to get ahead is to relax lending standards and allow them to buy with no deposit.

  • neonlight on 21/08/2015 - 14:40
    +1

    How do you define young generations here? We are in our mid 30s we also feel the same thing too late to get any property investment or buying a place at all? You think it's only the people in their 20s? Come on?

    Today went to Maccas in 3 years, saw they no longer have staff taking your order, using touch screen self ordering and pickup at checkout. I can imagine more and more of this discard human resources eg. Supermarkets already doing so

  • zorrt on 21/08/2015 - 15:38

    Simple solution, stop whinging and stop paying so much. People seem to think the house price just magically goes up. It goes up because that's what people are willing to pay for. Oh boo 600k is too much for a house, I know! I'll buy it for 750k! 750k!na I'll buy it for 1mil instead.

    Obviously we can't do much about it now since majority of house buyers are willing to fork out the money. Just quit trying to blame it on a previous generation when it's the current generation who's also contributing to it.

  • ozeebee on 21/08/2015 - 17:35
    +1

    To think that the government will do anything to slow down the property increase is a bit naive.

    The problem Australia is having at the moment is that since the mining boom slowed down significantly, Australia no longer has a cash cow they can rely on. And there is really nothing else significant enough that can replace the income mining brought in previously. There is no manufacturing, agriculture, IT etc to rely on.

    At the moment, properties is all Australia have to keep the economy moving forward or at least stay still, otherwise the economy will go backwards. Selling off properties to overseas investors is not such a negative thing, as hopefully these cashed up investors will decide to move to Australia and bring their money with them create companies which then creates jobs and get the ball rolling again.

  • Thaal Sinestro on 21/08/2015 - 20:47
    -4

    I cannot wait until the baby boomers start dying off. Because they are such a large demographic bulge, governments go out of their way to appease these grapsing, selfish individuals at the expense of the rest of us. It's intergenerational warfare, and GenX/GenY are losing. The baby ka-boomers are largely responsible for housing being so expensive, and soon the country will go broke paying for the pensions and health care of boomers owning 1 million dollar homes.

    • RockyRaccoon on 21/08/2015 - 22:19

      Why bother waiting, we should put you out of your misery and shoot them now, should't we 😵

    • johninmelb on 23/08/2015 - 12:20

      I am sorry, but that is just pure unadulterated tripe.

      The government does nothing to appease me, I can assure you of that. Following Abbot's orders, Centrelink treats me like dirt.
      I would remind you that I worked almost continuously from 1967 to 2013 with only a couple of short periods of unemployment towards the end of my working life. So I had minimal handouts from the Government after paying my taxes for 47 years. I am not asking for a medal, just to be treated fairly.

      Never in your wildest dreams, could anyone describe me as a "grasping, selfish individual". I have done nothing at "your expense." I don't own a million dollar house, I have a small unit. I shop at Aldi, my clothes come from Target and BigW etc, I've never owned a Hugo Boss suit or anything nice like that. I drive a second hand Honda CR-V which is 18 years old. I'll admit that was a bit of an extravagance, but I love the car, and I wore the pain it cost me to pay for it.

      But I have had about 25 trips overseas to the UK, the US, South East Asia etc. Every trip was saved for, NOT paid for on a credit card.

      Don't blame me for your own shortcomings, and inability to plan your life, and make provision for your future. Like everyone else, you can have whatever you like. But you have to work for it, you have to sacrifice some things, you have to compromise, and you have to have the will and determination to rise above it all. Sadly many GenX's and GenY's lack these simple traits.

      If you spent less time out partying and boozing every weekend, less time with your face stuck in your latest iPhone, and took a jar of Nescafe to work, instead of buying coffee, etc etc, you would start to make some progress in life.

  • Dsquall on 21/08/2015 - 21:23
    +3

    I'm a gen Y and I don't see why it's appropriate to blame others for wanting to make a profit, hell if I were in there position I’d do exactly the same.

    What investors are doing isn't illegal and to say that there's some sort of moral culpability is a stretch too. I think people should get over the idea that property ownership is some sort of human right, maybe it once was easier to purchase property but that doesn’t mean it should be universal. Renting for a few years is not a death sentence and it isn’t realistic for everyone to be able to afford a large house in the inner-city, well, especially considering population growth.

    Personally I’m already up to my eyeballs in uni-fees and just borrowed some money of the parents to put a deposit down on an off-the-plan 1 bedder out west, because that’s all I can realistically handle. When I enter the workforce I’ll probably up to my eyeballs in mortgage repayments for the first few years. But you know what, that’s life. I’m going to give climbing the career ladder a crack because I do want a house in the inner city with the front yard and the pool but I know that’ll never happen if I sit around with my thumb in my arse blaming other’s for trying to make a better life for themselves.

    • goingDHfast on 22/08/2015 - 07:20

      Just want to say our country would be a better place if we had more young people with an attitude like you. Two thumbs up!

      • hahaboy on 22/08/2015 - 18:29
        +1

        "two thumbs up" after his "thumb in my arse" comment feels slightly wrong.

        • goingDHfast on 22/08/2015 - 19:50

          Sorry I'll edit it to “fist in the air” for you then.

  • destruction on 21/08/2015 - 21:43

    I think the biggest problem now is that you get charged for absolutley everything. Every company is out for a bit of your money. When i was young there was no internet. No mobiles. Bugger all computers or gadgets. No netflix or streaming services.

    Fuel was less than half the price it is now and i dont earn twice what i used to. My first car was 15 years old but at least you used to be able to work on them which is alot harder to do now.

    I could go on and on.

    So i guess what im saying is i do feel for gen y as it is alot harder to get into the property market now but you also have alot of stuff that we never had which unfortunately companies charge you for.

    I would love to see the comparison of how much somone could save by not using, hence not paying for all the technology and services that were unavailable when the baby boomers were buying ther houses and see how that money saved would increase their house purchasing ability.

    People living in million dollar houses while still collecting pensions is absolutely crazy as far as im concerned but is that really to be blamed on the boomers? It's like saying to your accountant " I dont want to take them deductions you can get me as i want to pay as much tax as possible to benefit my country" the laws may be crap but if you were in the same position would you not use them?

    So yeah gen y do have it tougher than i did but how do you think the next gen or the gen after are going to have it? Do you think house prices in sydney are going to drop to affordable levels in the next 20 years? What do you think these million dollar properties are going to be worth in the next 35yrs if you sat on one like the baby boomers did? Then whos fault will that be gen y's? Or do we blame the baby boomers for the next 100 years.

    Anyway im off to pour another scotch.

  • hamwhisperer on 21/08/2015 - 22:25
    +1

    This is not JUST baby boomers. They might hold a lot of it but this endless hate of baby boomers is rubbish.
    Firstly, if we had a bullshit evil tax loophole, we'd probably do it too, secondly these are our parents.

    That's not to say negative gearing isn't evil @#$ed up rubbish. I'm 37 and I've been saving for over a decade and I STILL refuse to buy a place, these prices are unacceptable.

    Negative gearing is an ass backwards disgrace, it's outragous and if you explain the concept to a foreigner, they sit, mouth agape, dumbfounded how illogical it is.
    Plus we're selling the whole country off to the Chinese (this doesn't make me bloody racist, I don't care if it's French, Spanish, NZ, etc) - it's about people with vastly more wealth than the average aussie, being able to buy their way in.

    Anyone under 40, and infact, anyone without a negatively geared property is currently getting shafted.
    I'll vote for ANYONE (Pauline Hanson, Bert Newton, A homeless man etc, I don't care!) who promises to end negative gearing.

  • apey2000 on 21/08/2015 - 23:01

    Dear OP,

    I take it your parents are not part of the baby boomers category?

    Regarding everything else you've said.. you are correct and that's life. Enjoy!

  • [Deactivated] on 22/08/2015 - 01:57
    +1

    My parents are baby boomers.

    Dad was a teacher and worked in the SEA/SEC (school curriculum and auditing organisation) for about 20 years. Then he traded up a safe government job and bought what all his friends considered a risky business/investment in '88. He was forty. The small business loan rates for a lot of those early years was over 20% (the recession we had to have).

    He got up at 5am. He went to sleep past midnight. When he could he managed to grab a couple hours sleep in the middle of the day when the business was quiet enough that he could have someone else take care of things.

    At the same time my mum continued holding down a full time job and helping dad out with the business. She had to commute ~1.5hrs every day to a place where she wasn't particularly welcome (country town school, not too impressed with the lady principal from the city). She got up around 7am and also went down after midnight. No midday naps. Working the vast majority of that time.

    They both worked 100+hr work weeks, in no small part because a 20+% interest rate is murder.

    The economy varies. There's harder parts and there are easier parts. My parents, baby boomers, took a huge risk while the economy was basically the worst it had been in their adult lives.

    So it's hard for me to cry about anything or blame baby boomers.

    EDIT Oh hey, and another thing they had to worry about that we didn't: the draft. None of us have been forced to go to a foreign country and fight for a vague notion of democracy. Again, pretty hard to cry about it.

  • Flet on 22/08/2015 - 09:07
    +1

    Our economy is set up to through subsidy to direct investment into land. The obvious subsidies are NGing and CGT discount but the biggest subsidy is implicit – the government infrastructure (roads, hospitals, schools etc) funded by all taxpayers that increases the surrounding land values for the owners and raises the price for the landless.

    We cannot do anything in life without a site to do it – at the very least we need a place to stand. Increasing land price and resultant private debt means there is less disposable income to spend on the goods and services capitalism produces. Therefore it not only makes first home ownership more difficult but weighs down the productive economy causing less business and employment, except in the FIRE sector of course.

    Nothing is likely to change soon but if you want to understand it read this excerpt from a recent book:

    http://www.progress.org/article/economic-depressions-what-ca…

    Another great book is “The Secret Life of Real Estate and Banking” by Philip J Anderson, an Australian author.

  • nikey2k27 on 22/08/2015 - 10:52

    It hard but get on it some way you will slowly get there.

  • jason101 on 22/08/2015 - 13:58
    -2

    Prices are driven by supply and demand - not old people and negative gearing. IMHO this post is focusing on the small picture (limiting demand) not the big picture which is availing appropriate supply for the existing demand.

    The governments (Federal, State and Local) need to increase land supply and become more lenient with respect to infill development and planning approvals (and approval times, by cutting red tape).

    It took the company I work for 5 years to get an approval to build 140 apartments (in an area appropriately zoned), we are currently waiting on an approval for 84 villas and 16 apartments.

    It has personally taken me 9 months to get a planning approval to build a standard boring house in an established suburb. Meanwhile I am occupying my current home - potentially keeping a first home buyer out of the market as my family are sitting on 2 houses - when we only need and want 1.

    Multiply just these 2 personal examples by hundreds of thousands of families building a new home or thousands of medium sized developers held up by local government and its easy to see why housing supply in Australia is under pressure causing prices to rise and rise.

    While kids are being born, people are living longer, single person households caused through divorce rise and we have a migration intake - prices are going to keep rising until Governments collectively deal with supply issues.

    • Flet on 22/08/2015 - 14:49
      +1

      While land banking and drip feeding by big developers artificially limits supply there is no doubt that negative gearing, especially since the CGT discount from 1999 has increased demand and prices. Look at the graph of the take-off of investor housing finance commitments from 2000 in this article:

      http://www.macrobusiness.com.au/2015/07/scott-morrison-repea…

      Macrobusiness has a lot of articles on this topic.

      • jason101 on 23/08/2015 - 09:24

        Sure land banking may happen here an there, but the majority of developers want to get into a project, keep their staff employed, repay their mortgages, minimise their risk and bank a tidy profit in the shortest possible time - blaming developers for constricting supply is a flawed position.

        Would you buy a block of land: Pay land tax, rates, infrastructure costs, planning fees, interest costs plus have your deposit/equity or trading capital tied up for years - Waiting for prices to increase so you can maybe sell for more at some point in the future.

        I think not.

        Why would developers think any differently….In reality land banking is a very small constriction on supply in Australia.

        • Flet on 23/08/2015 - 12:42

          What you say may well be true for smaller developers but the large ones who dominate the market certainly land bank massively. This would be to the disadvantage of smaller companies whose motivation is to build and sell, not speculate. They will have to pay higher prices for sites so there will be fewer of them so less choice and competition for consumers.
          Figures can be obtained for the share market listed land developers. Their 2014 annual accounts show they have 272,000 lots in development, with a disclosed end value of 81 Billion. Lot sales by the listed developers are around 25.7% of the about 65,000 national residential sales in the same period.
          As a multiple of the past year’s sales, listed developers hold approximately 14.9 years supply, which suggests this is where maximum land banker returns are currently found.
          The figures are from this article by David Collyer which is the latest in a series:
          https://www.prosper.org.au/2014/10/31/land-banking-profits-d…
          He says “While developers can rightly argue they are constrained by government planning controls, in practice, this is a feature not a bug. It provides an extremely high barrier to entry, confining development activity to those with deep, patient capital and the expertise to negotiate effectively with government – over years in some cases.
          Land under restrictive planning conditions switches from being regarded as a resource to be allocated to best use by the market, to a speculative commodity where motivations become inverted; because once the prices have started rising, the incentive is to withhold it while prices rise some more.”

    • Bystander on 22/08/2015 - 16:00
      +1

      True.
      Limited supply ensures that many people pay as much as they can. Low interest rates and relaxed lending standards ensure that people can spend more than they otherwise would be able to.

      Red tape, stamp duty, section 94 contribs, etc do increase costs and neg gearing, does increase prices to different degrees but they aren't the underlying cause of high prices.

  • suti on 22/08/2015 - 21:11

    The younger generation are being screwed, but unless they take to the streets nothing will happen.

    The important measure is price to wages ratio. Why should property prices go up faster than wages growth? about 8 years ago, a year out of uni i bought an apartment for about 8 times my graduate wage and that was a lot. With grad wages these days, this same apartment would cost at least 12 times the graduate wage in my industry. How is this fair on them? they got no chance seriously.

    They might as well leave Sydney and then possibly Australia as they seek a higher living standard elsewhere.

    • anna10 on 23/08/2015 - 19:26
      +1

      If the younger generation enrolled to vote in higher numbers and then encouraged a political party - The Greens(?) - to better represent them, they would have enormous clout. It would be easier and more effective than taking to the street.

      • Baysew on 03/09/2015 - 20:10

        If the younger generation enrolled to vote in higher numbers

        Enrolment and voting is compulsory for every Australian citizen aged 18 years or older.

        It's usually good manners just enrol and to vote once.

        • anna10 on 07/09/2015 - 15:20

          Yes, it is compulsory, however, like a few other things in life are compulsory, a lot of people don't do the 'correct' thing.

          I can't quote the % off the top of my head, but it is a huge lost opportunity that young people don't get around to registering. It's one of the reasons that conservative parties spring election dates as they know young people don't vote conservative and so are basically disenfranchised.

          Get rego'd to vote before Abbott calls the election!

  • ITveteran on 22/08/2015 - 22:42
    +1

    Guys, if you are doing home computer service in the million dollar house suburb, it's time to start charge $300/hour. This should be fair rate. If you are doing pizza delivery, get $100/delivery. Why become slaves for those parasites?

  • offal spokesman on 02/09/2015 - 18:22
    -1

    My opinion?

    well it is… Kill the baby boomers, or more accurately, stop saving them, stop keeping people alive just for the sake of it and allow people to euthanise.

    "Life is about more than just avoiding death"

    *Im a baby boomer by the way

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