this post was submitted on 12 Sep 2023

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Intergenerational Report 2023: Australian economy built on rent seekers who produce nothing (www.smh.com.au)

submitted 11 months ago by [email protected] to c/[email protected]

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[–] [email protected] 17 points 11 months ago (3 children)

I've been thinking about this perspective for a while now, so it's good to see the topic raised in the mainstream media. If you compare a business investment or buying shares in Australian companies with investing in property, there is much greater value to society and positive flow-on effects from business investing.
A business can use the investment to hire staff, produce more goods / services for export, and growing revenues mean more tax revenue for the government.
With investment properties, the owner buys a property by outbidding someone who may have just wanted a home and they then proceed to charge that same group with a rent burden. No additional jobs are created from the investment property and a cost burden is placed on the renter, reducing their disposable income.

As a society, we need to start thinking about investment properties in the way that we would think about fossil fuels. We know it is easy and it makes money, but it's bad for future generations and we need to transition to alternatives.

[–] [email protected] 3 points 11 months ago

The distinction is land vs capital. Plenty of economists talk about the problem you mention.

[–] [email protected] 2 points 11 months ago* (last edited 11 months ago)

Completely agree. That property value grows over time in a fixed area is natural behaviour, as an area develops, density grows and demand increases. But that growth is not necessarily "productive". The only time that value is productive is if it incentivises redevelopment into higher density dwellings to meet the demand in that area. However this has been perverted into property owners who have paid off their property to just sit on the valuable land and reap the capital gains.

Capital gains from land value really needs to be taxed in a special way as you suggest. I would propose two approaches:

Adding land tax (and abolishing stamp duty on property) that's not based on your property value but on the value of a property you're on (so high density apartments would end up with minimal land tax
increasing capital gains from land tax by either having a progressive taxation rate on capital gains due to land value (which would ignore increase property value from renovations etc) or capping it entirely (so gains above that are taxed at 100%).

[+] Dkarma -6 points 11 months ago (2 children)

I find it hilarious when people only do half the equation like u just did and then attempt to justify some kind of rhetorical utopia.

Finish the equation. When anyone buys a house there's a person selling. That person often buys a house or starts a small business. The point is you can't say with a straight face that the money spent doesn't go towards gdp at least and often times it does stimulate new growth and spending.

Why do u think new houses are built? Lol.

People love to trash landlords and sometimes rightfully so, but fuzzy math isn't fixed by confirmation bias...

[–] [email protected] 6 points 11 months ago (1 children)

Do you have any data or research on the profile of sellers? I find that there is not a lot of research out there, so I'm curious to learn how I would explore your claim that most sellers use their proceeds to invest in small business. Selling a property just to buy a property helps the real estate sector and some banks, but I think that calling it a valuable contributor to GDP is a stretch.

What we do know is that people in older age brackets typically own their own home (78%+ for the 65+ age group). However, people in that age bracket also demonstrate a decline in consumption, spending about the same as someone in the 15-24 age bracket. This could be interpreted to show that older sellers are not freely investing the returns from their property sales back into the broader economy. Instead, they are conserving their money to last through retirement.

[–] Dkarma 0 points 11 months ago (1 children)

I didn't claim that tho. I said that moeny goes somewhere...it has to. Either back to the bank for a new mortgage or a condo.

Op made it look like that money just vanishes. Even in the case of a big bad company they're paying agents and web designers and advertising.

Google what percentage of gdp is real estate in the US... https://www.statista.com/statistics/248004/percentage-added-to-the-us-gdp-by-industry/

Oh look...it's literally the biggest contribution.

[–] [email protected] 2 points 11 months ago (1 children)

Ah yes. The imaginary GDP created from trading properties with each other.

[–] Dkarma -3 points 11 months ago

Gdp is added to every time a real estate transaction is closed,yes. Get a clue dude ur out of ur league and simply looking stupid now.

[–] ABC123itsEASY 0 points 11 months ago (2 children)

Not to mention a good (yes, perhaps not even most are good) landlord is supposed to spend money up-keeping, updating and maybe even upgrading residential properties, therefore spending money on goods and services to do just that. There are hard working people who make a living working in industries that come from this market, but providing them some consideration doesn't mesh with the current zeitgeist.

[–] [email protected] 5 points 11 months ago (2 children)

In the 7 properties that I have rented over the last 15 years, I have never known a landlord to just kindly "update" their property. The properties are at an acceptable standard when first purchased and the only way that things change is when something breaks, is damaged, the tenants complain, or the owner is preparing to sell. This is probably influenced by the majority of landlords outsourcing property management to agencies (research suggests ~75%), who are financially motivated to provide the minimum basic standard for maximum financial gain.

[–] ABC123itsEASY 1 points 11 months ago* (last edited 11 months ago)

I don't disagree but having been on both sides of the token (I've rented a LOT of properties more than I care to count) I can tell you that homeowners nowadays are doing a lot of work themselves, maybe even work that they shouldn't be doing themselves. There can be some financially devestating costs to home ownership that people try to maliciously hide from you during inspection unless you're buying a house brand new. My point being that I'd imagine that at least partially factors into all of this and I'd guess that people renting out houses are more likely to simply 'hire someone to get it done' or have a handyman on speedial. Again, clarifying 'good' landlords. I wouldn't saying most are good, about 20% maybe in my experience, but still I do think there are reasonable folk that do a majority of their work servicing rental properties frankly I'd rather buy houses worked on by people like that as opposed to unqualified homeowners neglecting proper upkeep and creating time bombs for people trying to enter the market later on.

[–] Dkarma 0 points 11 months ago

In the US there are city departments that do nothing but examine local housing and notify landlords that things need to be updated. Correct most landlords won't do anything on their own even if it's a safety risk.

[–] [email protected] 2 points 11 months ago

The problem with that argument is that if a house is owner occupied then that still happens.
If the hot water goes then it doesn't matter who owns the house. A plumber will get paid to fix/replace it. In fact he will probably be paid more if the owner lives at the property because they will want a better system so that they can have longer showers.

[–] [email protected] 16 points 11 months ago (1 children)

I'm not going to read this because it will just make me grumpy. I see you waleed.

[–] [email protected] 7 points 11 months ago

You didn't miss anything. The article could be summed up by its headline. He offers no insights or solutions. Merely asks this question in detail.

[–] ChapolinColoradoNZ 12 points 11 months ago (2 children)

Another interesting fact is that coal and natural gas production makes up about a third of all the money coming into the Australian economy, yet it wants to claim being "net zero" by 2050. I say no way José!

[–] [email protected] 8 points 11 months ago (1 children)

Given that mining (all mining) has always made up less than 10% of Australia's GDP, how are you coming up with that 'about a third' figure?

[–] [email protected] 1 points 11 months ago* (last edited 11 months ago) (1 children)

He's talking about exports

https://en.m.wikipedia.org/wiki/List_of_exports_of_Australia

[–] [email protected] 3 points 11 months ago

Ahh that makes a bit more sense, but still even using those figures, coal is 15% of exports and gas 7.7%. Less than a quarter combined, nowhere near a third.

We absolutely need to wean our economy off coal. I believe we can do it well before 2050.

[–] [email protected] 0 points 11 months ago* (last edited 11 months ago) (1 children)

There won't be anyone to sell those resources to well before 2050, so we have no choice but to transition. Thankfully, we have an absurd amount of renewable resources and iron ore and rare earth minerals will still be needed. And we can do a lot of "value added" type work by not just exporting raw materials but at least building part of the final products.

[–] ChapolinColoradoNZ 0 points 11 months ago

Are you seriously discarding all those underdeveloped and developing countries which will not "hit the target" by 2050? If countries with millions of people they can't even feed properly need coal or gas to simply keep the lights on, there will be a market and governments will look the other way while exporting hydrocarbons. It is what it is. Also, cobalt mining, look it up. Tragic stuff.

[–] [email protected] 10 points 11 months ago (1 children)

Paywall irony

[–] [email protected] 5 points 11 months ago

Internet archive to the rescue!

https://web.archive.org/web/*/https://www.smh.com.au/national/in-australia-why-do-people-who-produce-nothing-get-rewarded-the-most-20230824-p5dz4w.html

[–] [email protected] 8 points 11 months ago

I mean this isn't really surprising when there's a policy structure in place that incentivises rent seeking. It's interesting how all of these people are like shocked when they realise neoliberalism isn't that great. Like what's next, realising that Marx bloke might have made a few good points about capitalism.