There’s no denying us Aussies like a bit of healthy competition. Culturally, we’re quick to measure our success against that of other people. Kind of like, keeping up with the Jones’s…or the Kardashians, depending when you were born!
For much of our albeit relatively brief history, there have been a few common yardsticks used to measure our individual and collective success.
Education,
Employment, and
Income levels, which of course is relative to the two aforementioned measurements.
Then there’s the big one – home ownership.
Being a homeowner in Australia has long been seen as the pinnacle of success. And the more home you manage to own, well, logically, the more successful you must be!
A subtle shift in the success equation
Yes, if there’s anything we love more than a good competition, it has to be real estate. You could almost say that the pride of our nation has been built on sporting heroes and Hills hoists.
After working all week, homeowners often spend entire weekends primping and preening properties, manicuring lawns and meticulously attempting to make their’s the best house on the block. A suburban badge of honour.
Further cementing your level of success was how quickly you could pay down your mortgage and own your home, free and clear of those “bloody banks”!
Only 2 generations ago, outright home ownership was the ultimate demonstration of financial affluence. That, and a nice little balance in your term deposit account.
But that was when cash was king. And capital ruled. Nowadays, things are a little different.
How big is your portfolio?
New research out of the University of Sydney, suggests long-time societal delineations around what we did “for a quid”, have been replaced by whether we can secure a spot in the housing market.
As wage growth continues to stall and stagnate, while house prices rise ever upward, there’s been a subtle (but obvious) shift in the economic power play.
Co-author of the research project, Professor Lisa Adkins, said people who’ve sunk money into property over the last two decades have enjoyed exceptional returns in many instances. Whereas wages have grown at a snail’s pace during the same period.
Add negative gearing benefits to the equation, which essentially rewards taxpayers for the more houses and units they can collect, and it’s easy to see why the days of measuring success merely by a person’s income are all but over.
“In Sydney, it’s a middle class concern,” said Adkins. “People are very aware about buying property, the value of property. It’s something you do if you want to stay middle class or better.
“We’re living in an asset society.”
The 5 tiers of “success”
According to Adkins, and fellow researchers Melinda Cooper and Professor Martijn Konings, Australia – like the rest of the developed world – now has a five-tier, asset-based class system that looks something like this;
1. (a) At the top sit investors who have portfolios of diversified assets, without a wage. There income is generated from assets.
1. (b) They are closely followed by investors with portfolios of diversified assets, with a wage; where wages function as assets or capital gains for tax purposes.
2. Coming in third, are the good ol’, working class mortgage holders.
3. Then we have the “Churners” who have no housing assets, broken down into two sub-categories, being;
- Renters, and
- The homeless.
The research tells of a “structural configuration” of sorts, where the life chances of most people are now determined by property ownership, as opposed to their career trajectory and weekly wages.
The very fact that most of us couldn’t do our income tax without the help of an accountant, but can provide a detailed overview of how something as complex as negative gearing works, speaks volumes about how quickly we’ve become focused on asset values versus employment.
“Everyone seems to understand negative gearing and how it works for property investment. People know its importance to housing prices and its clear policy focus,” said Konings.
With the Reserve Bank continuing to keep interest rates at all time lows, and wage growth showing no signs of upward movement any time soon, it’s not hard to predict that fortune will continue to favour the asset rich here in Australia, well into the future.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).