Brickbats for Australian Boomers. Gen Y Bedroom Blocked Again

ruggedtoast

http://www.theage.com.au/comment/sick-and-tired-of-chasing-dreams-of-finding-a-home-20130404-2h9i4.html

Sick and tired of chasing dreams of finding a home:

I'm outraged when I read the occasional report that goes so far as to make the argument that those of us that belong to Generation Y (the renting generation) are too greedy and lazy to know what's good for us. The irony of such a statement is not lost on me.

I'm saddened that both my girlfriend and I will have no choice but to work well into our 30s so we can squirrel together a deposit for that two-bedroom dive she's so sure is just around the corner.

I'm saddened we are being made to delay starting a family, when it's all she wants. And 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.

This young man is the spokes-person for his generation, not just in Australia, but in Britain too, a country where the young are just as stymied as in Australia.

Generali

Like most countries, if you're prepared to buy in the grungier parts of the city you can buy young. One of the problems with Aus is their resistance to let people live in small houses and units (appartments/terraced houses).

The 98% mortgage is alive and kicking here plus you get a grant of $7,000 if you buy a second hand property.

ruggedtoast

What is the negative gearing they are all going on about in the comments?

Generali

ruggedtoast wrote: »

What is the negative gearing they are all going on about in the comments?

Negative gearing has to be one of the world's most stupid tax policies.

In Australia, if you buy an asset with debt and the income from that asset isn't enough to cover the interest you can offset that loss against the rest of your income.

For example, if I buy a house on a mortgage that is costing me $30,000 a year and then have charges and depreciation totaling another $10,000 a year. I then rent that house out for $32,000 a year. I also have a day job that pays me $80,000 a year.

In the UK I'd offset my $32,000 of income against my $40,000 and have to suck up the $8,000 loss. In Aus I can take that $8,000 loss and offset it against my income so that for all official purposes my income has fallen to $72,000. In addition to saving me income tax, that may well qualify me for our version of tax credits. That, in turn, may qualify me for subsidised child care, subsidised health care, access to preferential government programs of various sorts and even in extreme cases have the Government topping up my private pension plan (Super) for me!

In addition, if I buy a BTL place up the coast, I can go and visit it a few times a year. That means I can spend a couple of days going there and back and offset the cost of my holiday/business trip against income tax too!

It's crazy. I think it'll go in the next ten years TBH.

ruggedtoast

Crikey, that's nuts.

I would feel pretty aggrieved to be trapped on the outside of that policy.

Generali

It's ridiculous.

There's a policy over here of 'subdivision'. A farm or perhaps some 'Crown land' (Government owned land) is split into plots of between perhaps 350m^2 and 1200^2 (approx 1/2 an acre). The land is then sold off to individuals to build homes on by a developer who, in return for cheap land and development approval, has to provide roads, a school, a few play parks etc.. Negative gearing allows this land to be bought up by chancers in the hope of selling it for a profit somewhere down the line.

That doesn't really impact on house prices and in some ways it's quite nice to have a few open blocks in a suburb. It's crazy though that people are tying up capital that could be used productively to provide jobs for people and that they are subsidised to do it!

It encourages very bad investments in the name of reducing the tax bill. Lots of people seem to make bad investments deliberately for this very reason.

This undoubtedly keeps house prices in the cities high though.

ruggedtoast

Generali wrote: »

It's ridiculous.

There's a policy over here of 'subdivision'. A farm or perhaps some 'Crown land' (Government owned land) is split into plots of between perhaps 350m^2 and 1200^2 (approx 1/2 an acre). The land is then sold off to individuals to build homes on by a developer who, in return for cheap land and development approval, has to provide roads, a school, a few play parks etc.. Negative gearing allows this land to be bought up by chancers in the hope of selling it for a profit somewhere down the line.

That doesn't really impact on house prices and in some ways it's quite nice to have a few open blocks in a suburb. It's crazy though that people are tying up capital that could be used productively to provide jobs for people and that they are subsidised to do it!

It encourages very bad investments in the name of reducing the tax bill. Lots of people seem to make bad investments deliberately for this very reason.

This undoubtedly keeps house prices in the cities high though.

Would you say that this policy is specifically designed to benefit, the boomers - or are they just fortunate recipients in a world gone mad?

Generali

ruggedtoast wrote: »

Would you say that this policy is specifically designed to benefit, the boomers - or are they just fortunate recipients in a world gone mad?

I reckon the original aim was sound: it's a frontier country tax policy.

Think back 100 years. People had only been able to move more than 50kms west of Sydney for a few decades and there was a while country that needed opening up.

It's the perfect tax law for those times. Let a man work a few days a month as a lawyer or a merchant and use that money to invest in farming or to build speculative property to rent/sell to migrants or to set up new mines.

It's just stayed past its sell-by date.

PaulF81

Just wait till Generation Y are in political power. It's gonna be savage.

vivatifosi

I have rellies in Australia and their complaint is that it is hard to buy homes in the cities, which in Aus is where most people live, far fewer live in mid-sized towns like here. So if they want to buy somewhere the commute is really long, either from the distant 'burbs or small town Australia. What a couple of my younger relatives do is have a crash pad in their home state of Qld, in a small town where property is cheap, but travel for their jobs. One works as a live in nanny with very wealthy people, the other works in the mines. It isn't easy. When the cities were first growing, houses not far from the CBD were relatively cheap. Now they aren't.

StevieJ

ruggedtoast wrote: »

Would you say that this policy is specifically designed to benefit, the boomers - or are they just fortunate recipients in a world gone mad?

I think you and Biggles have what some people term 'issues'