Champ of Australia’s property market Tim Gurner recently claimed in an interview that the reason first-time buyers are finding it so hard to come up with the cash is because they’re frittering it all away on brunch and travel.
Tim Gurner knows a thing or two about property. He made an astonishing $473 million off it in 10 years. But his comments hit a nerve for young people – “Generation Y” (or millennials – basically twenty-somethings) - who resent unaffordable house prices keeping them out the property market. They might have resonated a bit more with the fifty-somethings – that’s ‘Generation X’ – who see the twenty-somethings forking out for overpriced avocado toast in edgy cafes, a treat Gen X couldn’t afford in their twenties, because they were busy saving for a mortgage, they say.
But is Gen Y actually spending so much more than previous generations, or are house prices beyond their reach – no matter how much they spend on avo?
Millennials are spending more ... on rent
According to one Australian Bureau of Statistics survey, people aged 25-34 spend a greater proportion of their income on housing now than in 1989. a figure that’s been rising pretty steadily since 1999. Rising populations and low availability of houses has caused rising rents that prevent people from being able to save for a mortgage in the future. - It’s called the ‘rental trap’, where you can’t save to buy a house because the rent is too high.
And we do love brunch ... but fancy dinners, not so much
The same survey found that yes, Gen Y do dine out much more frequently than their parents. But they’re actually spending a lower proportion of their income on it – basically, millennials are savvy when it comes to sniffing out deals and aren’t quite so into the five-course formal dining experience, so end up spending less. Millennial consumption has a heavier focus on experiences (bottomless brunch with your friends… and your insta followers, for example) and less on “stuff” - because hey, we don’t have a garage to put it in.
We're not actually that bad at saving, we're just in a lot of debt
Millennials are saving a higher proportion of their income than than they used to – in fact, all age groups are, comparing 2003 and 2010 figures. That’s because of more uncertainty around the future, paired with the fact that we’re living longer. But one study found that younger households saving more are also in more debt mostly from student loans, a problem Gen X didn’t have to deal with.
And house prices are definitely rising
Prices in Sydney increased by 18.9% last year. People are getting worried about a “property bubble”, when prices increase so much everyone loses sight of what the real value is. When there’s no more faith that the houses are worth the price they're going for, the bubble pops, so those that bought high have to sell low, making a massive loss.
So what's the verdict? Millennials do enjoy brunch, and with social media can be louder about it than ever before. But according to the number crunchers at the Guardian, a 20% deposit on an average priced Sydney house costs $204,400 - that’s the equivalent of 9,291 delicious avocado toasts. If you cut back on one avo toast a week, it would take you 178.7 years to save enough money. Seems like an obvious solution, right?