by Chris Becker
Collectively, Australians love bashing America for their brashness, consumerism and patriotism (although don’t hold up a mirror during this Olympics season!) and wackiness, particularly in politics and of course Florida Man.
But there are two vast differences between the countries, both of which need to be weighed up if you’re young and willing to take a risk. First, its house prices. Here’s the real house price index for US houses in semi-log scale from 1890 to 2015 by Visualizing Economics
Now here’s Australia’s over a similar time period, and comparative with the USA.
Today, soon to be former RBA Governor Glenn Stevens admitted in an interview at The Oz’n’Chips via The Age that:
The outgoing head of the Reserve Bank says high cost of housing had led to “intergenerational issues”, saying many younger Australians will only be able to buy into the expensive Sydney market with the help of mum and dad.
In an interview with News Corp, Glenn Stevens, said while it has always been hard to get into the housing market, there were many factors involved today, including: zoning, transport, infrastructure and changed preferences of where people want to live.
The 58-year old said a lot of parents of his generation would end up financially assisting their children into the property market.
“I think that a lot of people of my generation are actually going to find themselves, if they haven’t already, helping their children into the housing market because that may be almost the only way that their children can enter the Sydney market,” he said.
Mr Stevens said this would lead to parents having to reassess their level of wealth.
“That, of course, means that for people of my age, that the wealth we think we have in our house, actually, we don’t have quite as much as we thought because we’re going to have to give some of it to the next generation.”
He said this would also lead to disadvantage being perpetuated for families who only rent but added that he did not have all the answers to the complex problem.
Yes, the USA has a lot of problems – abhorrent gun violence, structural racism and a completely screwed up healthcare system. Oh and that orange haired dude and all the other members of the corrupt political power class. But one thing they get right is innovation and part of the answer to that success is a lower cost of living, namely house prices.
The counter fact is this: if you want to start a business, or be involved in leading research and high technology in this country, you need to be living in Sydney or Melbourne. There’s no getting away from that. And because of the abnormal way STEM professionals are paid – i.e about 50% or less of their real worth especially compared to less qualified professions, particularly in finance – they can barely afford to pay for the cost of housing in those two cities. I have spoken to many research scientists and tech grads who worry more about how they are going to pay the mortgage than they do their projects, sometimes leading to them gaming research proposals for a “sure” grant instead of a blue sky one – an absurd situation in the “Lucky Country”.
As Captain Glenn rightly points out, not even a high income is enough to gain access to the housing market, but requires parental help, which paradoxically is going to make the situation worse as they convert their ephemeral housing equity into more meta-money joining the housing bubble. This is a situation the banks love and want to perpetuate where its no longer “equity, mate”, its “parents, mate”.
If you’re young and wanting to experience all that this dynamic 21st century has to offer, I would be hitting up my parents not for a housing loan, but a ticket to the US. Cost of living is not something hanging over your head with lower house prices structurally a given, wages for STEM graduates far exceed that attainable here in Australia and opportunities to work outside of a broken research system – where both funding and opportunities are scarcely available – are almost endless.
Go now before you end up with a mega mortgage around your neck. You can always visit the Greece of Asia later to check up on your parents and your friends working at the cafe.