This is from the files of "Don't Say I Didn't Warn You" - The following is from The Age:
THE average Australian family can no longer afford the average home mortgage, according to new figures that paint a devastating picture of how unaffordable housing has become in capital cities like Melbourne.
As the Reserve Bank considers raising interest rates again next week, figures from the Real Estate Institute of Australia suggest households on average incomes would need to spend $3 in every $8 they earn just to service an average mortgage.
After tax is deducted, it gets worse: the figures imply that almost half the typical family's disposable income would be consumed by the average mortgage.
The housing affordability index, published by the Real Estate Institute and mortgage guarantor Deposit Power, shows that the combination of soaring house prices and higher interest rates is pricing both buyers and renters out of the market.
Several things have brought this into play. Thanks to workplace "reforms" by the Hawke, Keating & Howard Governments (Rudd shows his colours elsewhere, see below), real wages are and have been falling. The general drive for profits has seen an increase in income inequalities to the point where as of today, the bonus day of 2008, it is now official that the Great Australian Dream of owning your own home has died.
I forsaw the structural reasons for this some four years ago:
(from HORSE 98 - 22/04/04 - Generation X, Y and Debt)
The burden of payment falls on Generation Y and E (1975-1995). For the first time we have a group of people who will be in large debt before they purchase a house. Predictably this money to generate the debt from has to come from somewhere, and that my friends over the next 20 years will be pulled out of the system by the Baby Boomers. Everyone saw this coming in the 1970's and of course they knew then how to deal with it, selfishness.
Generations Y & E therefore face a really huge challenge. No job security, the prospect of being priced out of home ownership and paying rent forever (to the Baby Boomers), living in debt from age 18 (to be educated) and above all, having to listen to their retired parents say "it wasn't like this is our day". Sadly it means that the most childish and selfish generation in history will never grow up and their kids will be too old to listen to them.
This is the catch. In an election race politicians never ever talk to Generations Y or E. They will not hold enough of the vote nor power to make a difference so pollies don't see why they need to be addressed.
There is even a misconception that we're generally better off, as indicated here:
Gen Y are the same people as youth have always been. The difference is that there is more money and technology than ever before. Gen Y is just a arrogant and selfish as all teens have been. [or not - there are good and bad in all generations]. My generation were told we had everything given to us. That we didn't appreciate it cos we never struggled. meh. The reality is that considering consequences is not a thing that teens are known for. In fact a lot of early 20's I know struggle. Dammit - I struggle sometimes :)
"My generation were told we had everything given to us". Were told is quite an operative statement here, for being told something and then discovering the reality is quite different. As for having more money and technology? Technology yes, money... no. The sad fact is that the biggest owner of residential property is no longer homeowners, but investment corporations and other financial institutions; unlike other countries, there's nothing to stop them either.
If people are throwing most of their money into their mortgages, then I hate to tell the Reserve Bank but it's not consumer spending which is fuelling this inflation spike but wages-pushed demand. People want higher wages to pay for higher interest rates, so companies that actually do pay a higher wage then pass those costs onto the consumer.
Then I happen to spy this gem from today's Financial Review:
THE Rudd Government's first budget will include an initiative to drive investment in affordable housing projects, by providing $6000 tax credits per dwelling to corporate investors.
"It opens up a whole new class of investment in residential real estate, and I hope over time it will become an important new area for the supply of affordable rental accommodation," Ms Plibersek has told the AFR.
If you read through the 498 page document, then you'll find that this is only available to coporate investors holding $10m plus under management. The net effect of this is to advantage coporate holding of residential property which in turn will help to drive out the mum & dad investors of the market.
Ah the Great Australian Dream - soon to become part of Great Australian Dreamtime. Late as of 29th Feb 2008. R.I.P.
One Word Weather With Nelson Mandela
2007-08 the summer that never was.