To the question I'd answer 'all the above' plus our consumerist society and thus reduced propensity to save.
Though mass consumerism started when real wages grew to allow more than just the basic necessities, it received a boost when hire-purchase started (1950s?) and (especially) when the banks got together and posted everyone their own Bankcard circa 1974.
By this time the baby boomers were becoming dominant. Unlike their parents, they were raised in an environment of full employment and relative national security (Vietnam war and the risk of being conscripted being the main exception). Though houses were smaller than they are today, living standards improved, with most homes having a car and a TV by the 1960s.
Mass unemployment only came after 1975 with subsequent peaks in the early 1980s and again the early 1990s. However unemployment and other benefits, though low compared with some Eurpean countries, protected the jobless from US-style poverty.
There was thus less necessity to save for unforeseen events as people could get help from the government. Also we were a nation of employees in full-time jobs. You started work in your late teens or early 20s and retired around 65. This was the socially-accepted norm. If you were a public servant on their generous super, you might be able to retire a bit earlier. But the rest of us stayed as workers, and if we were lucky owned our home outright and had a few thousand in the bank. The idea of people retiring earlier due to their own investing had not yet captured the public mind, though there were no doubt a few entrepeneurs and investers who'd done so.
With lower infant mortality, women's education, careers, feminism, etc resulting in smaller families our population is now aging. Governments in the 1980s started worrying about how to pay all the pensions needed in the future, so introduced the assets test in 1984 and compulsory super in about 1990. But we still spent heavily on consumer goods and didn't save much.
It's paradoxical that despite all the talk about superannuation and investment, our level of household saving is at a record low and our credit card debt is at a record high.
What do we have now? We have baby boomers, less than 15 years from retirement, who have become accustomed to their living standard. An $18000 age pension might be fine for their parents, but not for them!
So how to get a few hundred thousand more quick smart? Yes you could save 10% of your income and put it into term deposits. But that won't get you much if you want to retire soon.
So it's got to be growth investments for the elusive quick buck. That means shares and property, either directly or through managed funds. And you know what happened with shares! Thus the subsequent interest in investment property, particularly negatively geared.
Then there's a younger group (which includes me!), in their 20s and 30s, who are also getting into investing. None of us can remember full employment. The concept of a 'job for life' is gone, with outsourcing, more casual work and the possibility of several career changes. Increased unpaid overtime is impinging on family life. More of us (thankfully!) are questioning the conventional career paradigm, though our own experiences and reading books like RDPD. And some of us are finding answers though seeking multiple income streams via our own businesses, employment and investing. Also, particularly in Sydney and Melbourne, those of us sidelined by the current property boom are finding that we can afford to buy cashflow properties in country towns while continuing to rent near where we work.
I conclude that demand from both these age groups (baby boomers and their offspring) is what's driving the current property investing market. Time will tell whether this will last or not.
Peter
