Updated: Jun 21, 2020
The problems with mum & dad investors relate to their views of tenants as cash cows to pay for their mortgage, refusal to carry out basic repairs and maintenance, and pricing first home buyers out of the market. But am I just holding a grudge? Do we need private property investment?
A common argument is that private investment leads to more property development and thus increases supply. However there are a number of flaws in that argument and everyone who’s renting in Sydney knows that the social experiment has gone terribly wrong.
Statistics show to detrimental effect of private property investment
These ABS figures are quite dated (comparing the 20 years from 1994 to 2014). But they help to dispel some of the myths.
During that 20 year period, the proportion of households renting from private landlords has increased from 18% to 26% nationally.
In NSW, private renters have seen an increase in average weekly housing costs by 58%, compared to 29% increase for owners with a mortgage and 47% for public renters (Source: Australian Bureau of Statistics Housing Occupancy and Costs). Private investment acerbates housing stress and affordability issues.
Why do Australians invest in property
The real motivation for buying an investment property is less altruistic. Australians want to get rich, and they want to do so quickly. With prices doubling every few years, banks lending generously and attractive tax incentives like negative gearing, who can blame people for thinking it’s a bloody good idea.
But it’s not just greed, there is also a darker psychological part to this. Certain people get a real kick of out their new found status as a feudal landlord or landlady.
The guys at Things Bogans Like put it so succinctly:
“The bogan hates being told what to do, hates having its movements restricted, and hates feeling obliged to anyone. This is an important reason why it loves purchasing investment properties; so it can tell someone what to do, restrict their movements, and have someone feel obliged to them.”
Investors need to be able to bear the risk
I don’t mind people parking their money in property if they are wealthy enough and can bear the risk. That's right, there is a risk - property prices go through cycles, and your property might be vacant for a while or need major maintenance work. But this small scale investment, where one poor soul squeezes the blood from another working family, is neither fair nor sustainable. We cannot allow one group of people to extort more and more money to finance their lavish cruise ship holidays and comfortable retirement in the name of wealth creation.