When it comes to the housing bubble in Australia, real estate investors usually cop the blame for driving property prices skyward.
But one researcher is using unique industry data to build a profile of Australian investors that’s busting some of the most stubborn myths on housing prices. And it could be used to protect a range of vulnerable communities and our economy as a whole.
When Dr Maria Yanotti from the Tasmanian School of Business and Economics studied a unique dataset from one of Australia’s four major banks, she made a surprising discovery.
“There’s an argument that the housing price bubble in Australia is being fuelled by property investors getting into the market,” she said.
“But small scale investors, which constitute the majority of residential property investors in Australia, are actually more broadly investing in regional Australia. There is no evidence suggesting they are the ones pushing the prices up in the big cities.”
Sights set on the country
As Dr Yanotti explains, this investor focus on regional areas could have complex implications for local economies, because the investment will lead to more development, which will in turn drive housing prices up.
Dr Yanotti is now in the process of investigating the kinds of properties that real estate investors are buying, in addition to where they’re buying and what their motivations are, to understand why they’re opting to invest regionally instead of in the cities.
“I’m looking at that comparison between big city and regional areas, and whether the impact will be positive or negative. I want to know what the short- and long-term effects are going to be,” she said.
“I’m exploring why they choose to invest in certain areas – is it just because it’s a place that’s affordable, or is there something else to it? Are investors following the market trend, or are they generating the market trend?”
Power supply
Dr Yanotti is also using her expertise to find new ways of protecting vulnerable communities, such as the elderly or financially disadvantaged, from further financial hardship.
She’s currently investigating household energy costs and financial literacy in Australia, and hopes to deliver major new insights to policy-makers to ensure a safer experience for vulnerable communities looking for finance options.
Households pay too much for energy. I want to know if there’s any correlation between that and low financial literacy.
“I want to know how maintaining an energy supply impacts on the finances of our most vulnerable communities. We need some kind of policy solution for people under stress.”
According to Dr Yanotti, the existing literature on how financial literacy affects energy choices is far too general to explain what's actually going on at an individual or household level, so she’s pursuing an industry partnership with energy supplier, Aurora Energy, to collect more detailed data on the energy choices of vulnerable communities.
She’s also preparing to conduct in-depth surveys with members of the Australian public to better understand how people under stress make financial decisions – and what could help them make more informed choices.
“If we only used secondary data, we’d be lacking the part of what it is that people are not getting,” she said. “We need to understand how people make their energy choices – what they understand and what they don’t.”
While we all want to pay less on our energy bills, helping people with low financial literacy make better choices has benefits for the whole economy.
“I’m looking at how people can make choices that are good and economically sustainable,” said Dr Yanotti.
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