Great article from Peter Switzer
It looks like it’s capitalism to the rescue and its ability to induce ‘outside the square’ thinking just might reduce the hate session young people have for baby boomers over their dominance of real estate assets.
Over the weekend, smart economics writer, Jessica Irvine, who graces the Fairfax Sunday papers, reminded us how annoying it is that baby boomers hold so much of the property that Gen X’ers and Gen Y’ers covet. Some critics even resent that baby boomers live so long and have the temerity to live in their homes — big homes — too long as well!
It’s an intergenerational hate session over the thing that used to force tribes to war over past centuries — land! And the arguments against baby boomers (and even older Australians) have been powered along by the Grattan Institute, which seems to spend a lot of its life telling baby boomers that they’ve had it too good and have been ripping off younger Australians.
How did they do that? Firstly, living too long — damn modern medicine!
Secondly, after being told by Paul Keating in the 1980s that they wouldn’t get the pension, they’d always been promised, if they had too much money and bugger all super, they looked to investment properties to build our wealth quickly.
Thirdly, much higher tax rates encouraged people to use the taxman and tax refunds to bankroll their life as a landlord. This was encouraged by the rise of the media money-men and women, who started to get air time and column inches in media outlets, like yours truly.
These money mentors started explaining the mumbo jumbo of wealth-building that once was only known by a group who used to be called “the wealthy”!
So that’s why baby boomers went into property but two big things have made it such that reasonable people like Jessica admit that the current housing situation makes her blood boil, a bit.
Firstly, governments have slugged huge charges on developers and have put ridiculous restrictions on them, as state governments effectively got out of public housing. Dumb governments have created a housing supply problem, which has pushed prices up for the existing stock. And it has happened while Australia has one of the fastest population growth rates of the Western world. Governments screwing up? No!
Secondly, cool younger people like Jessica don’t want to live in the boondocks too far away from great cafes, entertainment and cool lifestyles, especially when many dumb governments have done precious little to create great, affordable public transport systems.
So that’s the problem and here’s the ‘outside the square’ part-solution and I call it the Manhattanization of our cities.
New York’s Manhattan is a huge paddock of apartment blocks with most New Yorkers being renters. Anyone who watched Seinfeld would know that and there’s enormous competition for apartments when older people die, as a Seinfeld episode showed us.
The Age newspaper today tells us about groups such as Mirvac that are planning to build apartment blocks purely to rent out.
“They’ll be nothing like we’ve seen before, either, with building managers looking after apartments, staff to look after leases and run ‘community’ events, and onsite cafes, shops and work spaces,” Sue Williams tells us.
“There will also be long-term rolling leases with the potential for tenants to transfer to other allied blocks in different areas if their jobs or circumstances change.”
Adam Hirst the GM of Capital Allocation at Mirvac explained why this new style of building is coming.
“It’s a lifestyle choice of millennials, young families and downsizers, and the choice of a growing number of people,” he said.
“There are currently 2.5 million rental homes in Australia and we see that growing in the next few years with purpose-built apartment buildings for the rental market”.
“It’s well-established overseas but, in Australia, it’s a new form of housing and there’s a lot of excitement around it.”
This will become a new asset class that the retirees — those damn baby boomers again! Could invest in but, better still, it should entice our super funds to use their money to bankroll affordable housing, which will return a reliable flow of income.
Ironically, this move could slow down house prices rises in hot inner city locations but could raise prices in sea-change and tree-change areas as weekly, inner-city renters escape to the country on their weekends, like lots of New Yorkers and Europeans do, who have grown used to believing that owning a property in their home cities might be just too hard.
Given the incurable stupidity of the politicians who populate governments, who never seem to come up with solutions to our social problems, thank God capitalism throws up lateral thinkers, who love profit and who can do the fixing our so-called leaders always fail at.