Quiet Entitlement: The Problem with Mum and Dad Investors

23 March 2020

Australians need to change the way we view buying a house. Since the Menzies era, owning your own home has been integral to the Australian dream. A right afforded to those who worked hard and paid their taxes. Good citizens. Now that belief has evolved into something far more toxic: that it is your right to make a handsome sum from the property market. ‘As safe as houses’ is the phrase. While Australians in particular have always sought financial security in the property market, why is there is an expectation that housing is now more than a financial stabiliser, but a financial enhancer? We have all heard that house prices are too high, but what we don’t hear is that they need to come down. As Australians continue to believe in the never-ending returns of the property market, we know that if house prices are to come down, millions of people are going to lose big. Since the conversation concerning negative gearing and capital gains tax reduction has been effectively put to bed since the last election, the government seems intent on protecting the investments of Australians who have put their money into the property market. One phrase in particular sums up this entitlement: Mum and Dad Investors.

Mum and Dad Investors are small scale, non-professional investors. This term enables a distinction between people who invest in the property market and people who invest in anything else. If you invest in the stock market – you’re a fat cat, if you’re not a property developer and you invest in property – you’re a Mum and Dad Investor. Such a concept manifests as an embodiment of the Australian ideal: A quiet, honest, normal, hardworking, citizen. This may be a dangerous evocation to make, precisely because of its innocence.

The innocence attached to property investment neglects the dire reality of the situation that comes with the phrase. For a country where around seventy per cent of us are homeowners, and where household debt has increased by seventy nine per cent since 2004, it is fair to say that there would be a lot of nervous Australians if house prices were to fall. People who own one home are forced to see their house as an investment too, for a downturn would spell disaster for households that have become “the most indebted in the world”. However, ensuring the return of these investments is ludicrous. The government makes no similar argument for business investments or investments in stock, so why would the housing market be any different? Ensuring that property prices continue to rise to ensure that thousands of Australian’s don’t lose out on their housing gamble is the extreme example of picking a winner, a tactic that governments shy away from doing publicly anywhere else. 

Bringing down the price of property is perceived as necessary by most people, but simultaneously an unthinkable ruinous possibility by others, despite the significant difference between the right to live in a home and the right to ensure a capital return from one. Reducing the incentive for property investment may restore the balance between seeing a house as a home and seeing a house as a financial opportunity. Investing in the property market is a gamble. A gamble that everyone has the right to make, but a gamble just the same as those trading in international currency, gold or stocks. Australians love to emphasise our belief in the right to home ownership, but as less and less people have the capacity to own their own home – we must stop connecting home ownership with capital gain. Now the financial fate of those who own one home, and those who own five, are forever connected. Both will either see a win or a loss.  

Policy reform is necessary, and there are vital conversations to be had over negative gearing and the capital gains tax that promote housing investment, but it is conceptual reform that is just as important. We must not demonise people who can afford to buy property, nor should we act like buying a house is the only way to ensure financial stability. Unlike all other investments, having a home is both an absolute need and right for all Australians, making for a dangerous cross-over between capital investment and human necessity.

A 2018 report by the Grattan Institute suggests that building an extra 50,000 homes a year for a decade could leave Australian house prices five to twenty per cent lower than they would otherwise” however without true conceptual reform, this only adds 50,000 chances to make a profit rather than 50,000 homes for people to live in. 

Pressure on the housing market will not be relieved by reducing the amount of people wanting a roof over their head, but perhaps it may be eased by re-evaluating our perception of those wanting to make a buck. 

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