Colombo Telegraph

Free Market Economy Conditions & Freedom Of Living: High Cost Of Housing In Cities

By Siri Gamage

Dr. Siri Gamage

The neoliberal economic doctrine that dominated the world in the last few decades and still doing so has created conditions in societies, especially their urban centres, that deserve further critical scrutiny by the alert and educated intelligentsia both in developed and developing countries. This is because these new conditions have not only generated highly competitive learning and working life for citizens and in some cases immigrants but also the drastic changes brought about by the new system have compromised the freedom of living for many, particularly the young and the middle aged. Those employed in the private sector in particular seem to live for work and in many cases to pay off heavy mortgages and other loans rather than the other way around.

Ideally, competition is supposed to bring down prices of commodities, other products and services. There are examples of this happening, e.g.telecommunication. However, there are many examples of the opposite. Generally speaking, a healthy society provides conditions for their citizens to be able to educate, acquire skills, be gainfully employed, buy a house, car or have access to transport facilities, medical services, recreation and contribute to the community welfare. Conditions for a good and comfortable life is provided in such societies while preserving the physical and social environment, the latter in a conflict free, cohesive way. Citizens live in happiness and spend their non-working days and hours in pursuit of other interests such as reading, recreation, reflection, writing, sports, travel, helping others and more. There is work and life balance. But the conditions of life that have been created by the free market economy and associated practices have brought many pressures and challenges that have compromised freedom of living.

How does these new conditions appear in everyday life? What can they do to our sense of being, human relations and core values? Has the neoliberal free market economic doctrine done irreparable damage to the social fabric of societies which were based on good old norms, values, fair play, sense of being, community and altruism? In addressing these questions, I need to use the example of Parramatta, an urban suburb of Sydney, to elaborate.

To start with, urban living has been constructed in such away that one or both partners in a family have to work and earn a living. This is not the problem. All have to work and pay taxes to the government which in turn spends them on services, infrastructure etc. However, with the income received one has to pay rent or if one has bought an apartment or house need to pay the mortgage. One has to buy consumables like food, clothing, and medicine. There are various kinds of insurance products and other services one has to pay regularly, eg telecommunication, electricity, water, gas, and local council fees. In addition, there are various indirect taxes too. If the couple has children, there are further expenses. The point is that when a small family pays all these expenses, there is very little left for personal enjoyment and entertainment that can contribute to their quality of life.

When we go for our evening walk along the Parramatta River in the evenings, we see many Indian and other residents in the area doing the same. Indian and Chinese families have three generations together in such walks. They seem to enjoy the walks but many seem to be worried too. In the faces of the old and young, I witness a worried sign, serious outlook. Are they worried about the increasingly expensive urban living? Are they worried about the household budgets? Are they worried about the future prospects of adult children who will never be able to buy an apartment or a house due to sky rocketing prices?

It is a fact that in Sydney and Melbourne for example, housing prices have increased in the last few years beyond any belief. In the year up to February this year, the prices increased by 19 percent in Sydney. Melbourne followed with a 14 percent increase. It is reported that in these two cities, the housing prices more than doubled during the last five years (During the last 5 years property prices increased by 75% in Sydney). Largely investors and speculators drive this increase. The government is not taking steps to cool the housing market down as it relies on housing construction industry to drive economic growth after the end of mining boom. State governments received stamp duty income in billions. In this environment, those who had property before the recent rise are enjoying increased value. First homebuyers are finding it difficult to compete with cashed up investors and others who are trying to capitalise from the rising housing market. Low interest rates provided by the banks add fuel to the fire.

A new class divide has been created between those who own property in these two cities and those who do not but keep renting. Investors who own properties need those who are willing to or compelled to rent. Otherwise, their dreams won’t come true. It is often mentioned in the media that there are some who own more than 15 properties or more and claiming tax concessions. One television presenter who gives property advice owns more than 40 investment properties. There don’t seem to be an end to the greed of some and to the misery of others. What this example shows is that governments who follow free market, neoliberal policies advocating the need for competition, free trade, unfettered freedoms for the investors take the side of the investors over the welfare of large majority of others who are condemned to live a life of daily struggle and misery. Such governments often talk about the need for free market and individual choice for economic growth. They argue that without economic growth, services cannot be provided due to decreased tax revenue. What they don’t talk about is whether there are other models of sustainable economic growth that do not put much pressure on the young and the middle aged. This is not an abstract argument as in Europe where there are some countries that have not followed the neoliberal economic doctrine as in the English speaking countries in full and still able to provide conditions of life and freedom of living to their citizens to an acceptable level e.g. Germany and some Scandinavian countries.

With the new group of cashed up citizens who have benefitted from the property boom in the market whom I call new riches in cities like Sydney and Melbourne on one hand and others with borrowed money in a low interest environment trying to emulate the former, a new game is being played in the town. As a newcomer to Sydney from a regional university city about 450 kms away, I am only beginning to discover the differences in lifestyle between these two groups. I have had no experience so far about the third group who are not part of this competitive game and live in government housing or low rent accommodation mostly with government welfare. New immigrants from Asia, in particular China and India are also being sucked into this game of living and working as I see young couples with and without children visiting display homes in various locations operated by building companies that provide house and land packages that average $800,000. It is lot of money even for someone like me who is approaching retirement. Yet many of these young couples are planning to commit to heavy housing loans that extend to 20-30 years. From their point of view, it is perhaps better to buy a house or an apartment rather than pay rent long term. This is a basic human need whether one is immigrant or born in the country. The problem with Australian immigration policy is that it brings in close to 200,000 immigrants including temporary work visa holders annually and dump them in main cities like Sydney and Melbourne rather than spreading them across the country, especially in regional cities. This has essentially redefined some suburbs, brought in new social problems, and generated resentment among Australians toward new immigrants. It has also created conditions in these two cities that challenge freedom of living, particularly due to the class divide described earlier, the gap between the rich and the poor etc.

If there is a decline in the property prices, as many authoritative figures have pointed out, another disaster can befall those who are struggling to pay their mortgages. Young couples, whether immigrant or born here, can face an uphill battle to keep up with the monthly payments in high interest climate with heavy loans. Political leaders have been advised by many organisations, financial experts, economists, and academics about the need to take precautionary steps to avert such a disaster, eg.remove or reduce tax concessions available to investors currently.  If they don’t heed this advice and the road to riches through the property boom suddenly ends, the meaning of freedom to live can also change quite drastically for many young and middle-aged couples.

What this story tells us is that the propertied class in major cities in the developed countries can enjoy the freedom of living more so than the classes who are not owning property or those who are committed to heavy housing loans in the hope of becoming rich through the property boom. The anxieties and worries shown in the faces of Indian and other immigrant families taking a walk in the park next to Parramatta river in Sydney or sitting on benches in contemplation only tell part of the story. We have to wait for the next cycle in the property story for the other half. Lifestyle and material possessions of the rich class will be the same as they have made enough money by buying and selling. However, the life of others will not be the same.

The greed of some generates hardship to others. In this case those seeking to enter housing market for the first time or those who seek to upgrade.  Those involved in real estate business and property development are further promoting this situation.  For example one such company whose owner is Chinese employs 300 sales consultants who are also Chinese to market properties. There are many others doing the same. The story of Perth in Western Australia, which has faced the brunt of the end of mining boom, is the opposite as the housing prices there are much lower. So is in Brisbane in the State of Queensland.

What has all this got to do with market economy and neoliberal doctrine? The government and regulatory authorities in the name of this economic doctrine, associated principles and practices are allowing all this.

The lesson for us is to be careful when these marketing and sales people approach you to sell a house, apartment, land or any other product. Because, more than the words they utter, what really needs is for you to do independent research and make decisions independently. There are many tricks employed by sales people in this game, I detect. It all relates to money and profits for the seller, in these cases property developers. No one looks after your interest and your freedom to live. It is me, me doctrine that governs the world and city living.

There are lessons to be learned from the tale of these two cities in Australia for other countries that are driving the same model of free market economic growth at any cost and avoid the negative social consequences. When the speculators drive some parts of the economies such as the housing sector for their own ends and the governments provide tax concessions and necessary legal and tax frameworks, conditions of living created for the rest of the population become rather bleak to the point of losing the freedom to live for many.

Back to Home page