Rich get walloped by the downturn
By Jessica Irvine, Economics Writer | smh.com.au | 11 September
A dramatic role reversal is playing out across Sydney's suburban landscape as double digit house price falls in the east and north are matched by similar price gains in the west.
Class stereotypes are being turned on their head, as traditionally wealthy areas bear the brunt of shrunken share portfolios and superannuation nest eggs, while the so-called "mortgage belt" enjoys lower petrol prices and the lowest interest rates in more than four decades.
As the one year anniversary of the collapse of Lehman Brothers approaches next Tuesday, the associate professor of economics at the University of Western Sydney, Steve Keen, said it had been the upper classes that had felt the most pain.
"If you climb to the top of the tree, you have got a lot further to go before you hit the bottom."
A regional breakdown of house price statistics by the Fairfax-owned Australian Property Monitors shows the median house price in the city and eastern suburbs slipped below the $1 million mark last financial year, down 10.8 per cent to $960,000.
On the lower north shore, home to Sydney's most expensive housing, prices also fell 9.2 per cent to $1.18 million.
Meanwhile, a rush of first-home buyers has helped reinvigorate the south-west and west. Median house prices in Canterbury and Bankstown jumped 8 per cent to $443,000.
"You have got the two-tiered market, but in reverse," an APM economist, Matthew Bell, said.
A regional breakdown from the last census, undertaken by the Bureau of Statistics in 2006, also helps to reveal Sydney's pain points. At the time, the lower north shore was home to nearly 16,000 finance and insurance workers.
Another 13,000 lived in the city and 13,000 in Sutherland Shire. These employees have since borne the brunt of professional services job shedding.
Census figures also show the northern and eastern suburbs are home to a higher proportion of workers within 10 years of retirement, who could be forced to work longer to make up for shrunken nest eggs.
About one in 10 people in harbourside eastern suburbs were aged 55 to 65 in the last census.
Out towards Parramatta and the south-west, this proportion was less than 3 per cent, while the proportion of two parent families with dependent children was much higher than in the east.
According to the demographer, Bernard Salt, it is a case of "winners to the west and losers to the east". "You have to say that the Labor heartland has done better out of the downturn, as long as you have been able to hold on to your job, things have improved.
"For the entrepreneurial or bonus class, down on the harbourside, there has been property value falls, superannuation falls and also a loss of job security at the uppermost level. So it has been quite a shift."
The chief economist at CommSec, Craig James, said the average Australian was better off than they were a year ago.
"If you have been able to hold on to your job, and you haven't had your working hours substantially reduced, you have benefited from the fact interest rates have come down, petrol prices have gone down, there were tax cuts and government hand outs, and retailers have been actively discounting."
More than three in four workers in the western suburbs rely on their car to get to work, census figures show, meaning they enjoy the biggest benefit from lower petrol prices. In central Sydney, less than one in three workers use their car to get to work.
An economist at Macquarie Bank, Brian Redican, said that, more so than any other recession in the past three decades, this had been a rich persons' recession.
"Usually what happens is that the recession is led by areas like manufacturing and construction that turn down and it gradually flows up the chain to financial services.
Whereas this time, it was of course led by the financial services, banking and all those areas were cut back hard. They tend to be the high income people."
'The ballroom has taken one hell of a hit. The middle class is wondering what all the fuss is about and enjoying the band.
The lower class is paying a lot more for their bread and drippings, but no one has been thrown overboard yet.'
First published by Smh.com.au on September 11 2009
Visit smh.com.au for the latest news updated throughout the day
