Seems logical enough

“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he said. “We’re at a point now where the expectations of younger people are very, very high.”

He added: “We are coming into a new reality where … a lot of people won’t own a house in their lifetime. That is just the reality.” Asked if he believes young people will never own a home, he responded: “Absolutely, when you’re spending $40 a day on smashed avocados and coffees and not working. Of course.”

Homes cost money, hipster lifestyle costs money. Make your choice.

42 comments on “Seems logical enough

  1. Quite, Anon. When prices increase daily, by more than you can set aside from a day’s pay, and they do that for decades on end, you can forget it. Avocados be smashed.

  2. And lo! There was a great wailing and gnashing of teeth, for the man spoketh wisdom, and the Millenials were vexed mightily…

  3. Reminds me of someone I know (early 40s, married, no kids, both high earners) who complains on social media about not being able to afford the deposit for a house, but then posts photos of her regular holidays to New Zealand, Peru, etc.

  4. Isn’t the problem to be able to afford the deposit on a house where one wants, rather than where one can afford?

    I bought a house with 2 friends back in the 80s. It was where we could, not where we wanted.

  5. Well, yes and no.

    $40 a day on coffee and smashed avocado is $14,600 a year. Assume that $40 a day doesn’t include more fundamental, legitimate food costs, so cutting back on it doesn’t mean hunger.

    In parts of England, saving $14,600 a year – what’s that in old money? £11,000? – will get you something approximating a deposit in about five years.

    But that in turn assumes real estate costs in five years will be what they are today. In reality, you’ll probably need closer to £100,000 five years from now.

    Granted, spending $40 a day on coffee and smashed avocado is stupid. But it’s a deliberately stupid example. People spending those sorts of sums on such stupid stuff have realised instinctively that they have no financial future worth planning for.

  6. There’s some truth in it. I was listening to LBC and a young teacher came on whining about not being able to afford a deposit.

    The thing was, she lived with her parents and paid them some money when she was “able to” ; I don’t remember the exact wording but the impression was that she did it when she had some money left over which wasn’t that regular.

    Question ; an NQT earns about £25k. Apart from transport to and from work, what does her money get spent on ? Student Loans would be negligible.

  7. “In parts of England, saving $14,600 a year – what’s that in old money? £11,000? – will get you something approximating a deposit in about five years.”

    ‘Parts of England indeed’. In other parts 11k will buy a whole house, in others in between it’s a decent deposit. Most people have always had to choose between dribbling their money away day by day on small good things and saving it up to spend on big good things. Nothing new under the sun.

  8. I know people struggling with saving for a deposit in Melbourne, none of whom are spending $40 a day on breakfast and coffee.

    $400,000 is a minimum starting point for a crappy apartment that’s nowhere near an employment cluster, but at least near some transport. That figure has been going up ahead of wage inflation and avocado allowances. It’s really tough for people and they don’t need lectures from people who got on the ladder in a different age. Tips, sure, but no lectures.

    We all know the people who whinge because they can’t afford X whilst spending a fortune on Y. But these anecdotes don’t change the fact that housing is a lot more expensive than it was 10, 20, 30 etc years ago.

    Australia has a few tax ‘features’ that exasperate the problem for young buyers by making residential property a needlessly attractive investment option. The system is loaded against them. Cheap shots from the ‘I’m alright jack’ camp can fuck off.

  9. In my part of the world a significant proportion of the immigrants are Asian, mostly Chinese.

    As one of them said, you don’t see them buying a morning latte. It’s this attitude which gets them on the housing ladder whilst the natives struggle.

  10. It might also be something to do with average house prices being near six times average salary, whereas when he bought his it was probably nearer three.

    Inventing shit about avocados isn’t going to make that go away.

  11. I’m 26 (and have not bought a home). It’s a bit of both. People my age do blow a lot of money on expensive meals and holidays etc. (driven by the need to fill their Instagram profile). But then at the same time house prices are ludicrously high. A friend of mine recently bought a 2 bed flat in a nice-ish area in London (though not fantastic) and was set back £600,000 for the privilege. It’s the amount my parents bought their current huge 5 bedroom home for ten years ago, having climbed up the property ladder over their lifetime. I look at that price and think “what is the fucking point?” and so continue on not really looking to buy a house in the near future (despite saving far more than others my age).

  12. A friend of mine went traveling in India for 3 months and then bought a house – it was of course in 1995.
    Someone prudent with their money today is worse of than a spendthrift in the 90s.
    Tim mentioned a few months ago about a west Indian immigrant in the 1950s who paid off his mortgage in London in 5 years – no one could do that today.

  13. @Mal Reynolds
    “I’m 26 (and have not bought a home). It’s a bit of both. People my age do blow a lot of money on expensive meals and holidays etc. (driven by the need to fill their Instagram profile).”
    That happened (apart from instagram) in the past as well.
    The stamp duty on my house has gone from £600 to £10k in the last 20 years – that is a lot of economizing.

    The solution is simple make all pro single mums in London move somewhere cheaper, prices in London crash followed by everywhere a few months later.
    It would save a fortune in housing benefit as well. I would get pushed into negative equity but it would be worth it for my child.

  14. “house prices are ludicrously high” & similar comments in the same vein.
    House prices are the reflection of a market. You’re simply complaining that some people value living where you wish to live more highly than you do. It’s like saying Ferrari’s are vastly over priced because you can’t afford one.
    .

  15. @BiS: well…yeah. Hence why I do not fancy buying a house and do not see the point in it, given the current prices.

  16. @bloke in spain
    “You’re simply complaining that some people value living where you wish to live more highly than you do. ”
    I complain because the Government values other people living where I want to more than I do. If the Government didn’t take my money to give pro single parents nice houses, then I could afford to live in them.

  17. @BiS

    Well, like with houses, the supply of Ferraris is limited to assist with maintaining their value.

    But, unlike a Ferrari, everyone needs a home, and there are not thousands of modestly priced alternatives.

    But I agree that housing prices are set by the market. Complaining because the market made something expensive is like shouting at clouds. But it’s a shitty market that’s loaded against those without capital.

    My Melbourne flat is worth about $700k. I paid $630 for it a couple of years ago. It’s a modest two-bed, but in a really good area. I was in my late 30’s when I bought it, and had been well paid for a decade, and I live a modest life. Good for me, I guess, but if someone my age, who’s earned 3-4 times average wage for an extended period, can only afford a bang-average flat, then something is wrong.

    The housing market serves only to extract wealth from the young and pass it to the middle-aged and the old… both directly and via their holdings in Australia’s hilariously profitable banks. And that I’m going to be on the right side of that dynamic now doesn’t make me feel any better about it.

  18. TTG: but you are free to go and live somewhere else, surely? How are house prices in Geelong? Any lower?

  19. @The Thought Gang
    “But, unlike a Ferrari, everyone needs a home, and there are not thousands of modestly priced alternatives.”
    And unlike a Ferrari, almost anyone can make a home – or get someone to do it for them – if they have the raw materials + planning permission.
    The Government in the UK makes housing expensive.
    I don’t know why we think it is good that every generation has to put up with less housing than their parents, particularly when we could solve the problem very easily.

  20. The Thought Gang

    I am not seeking to argue with you or dispute tour ana lysis, just learn something. Please tell me how prices vary in different Aussie cities. Is Sydney more expensive? All of it? How about Brisbane, Perth?

  21. The high prices of houses are a result of several factors coming together. People living longer, consistently high immigration for the last fifteen years or more, divorce increasing the number of households etc.

    Put simply more houses will be built. Until that happens then the current ridiculously high prices will remain. But don’t hold your breath there is a huge pent up demand. Think of all those thirty somethings living with their parents.

    Osbourne’s tax credits for the first two children only policy has now come into force, and is causing the expected angst on the left. But it will help us in the long term. However the stamp duty changes are making it harder for people to downsize as big houses become more un-affordable.

    So to get prices down we need:-

    1. Less immigration.
    2. More house building.
    3. Several winters where the flu vaccine doesn’t work. That happened this year.
    4. A recession would help too.

  22. Ian Reid has nailed it:

    A few other actions which might help:

    1. Change in taxation to favour investment in Assets other than property (so abolition of stamp duty on shares)
    2. Restrictions on overseas investors buying residential property as an asset (especially leaving it unlet)
    3. Reduction in state expenditure to enable Private tenants to be exempted from Council tax
    4. Liberalisation of planning laws to enable more house building
    5. Abolition of the Human Rights Act and simultaneous outsourcing of long term prison inmates to countries such as North Korea to reduce recidivism rates and enable ‘no go areas’ with spare housing to be subjected to hard hitting police sweeps which should free up housing for ordinary people

    I am sure other contributors can think of a few other suggestions…..

  23. I could dine out for breakfast, lunch, and dinner every day for a month, and it still wouldn’t come close to my monthly mortgage payment. I do live in Middlesex London though.

    From the article:

    “When I had my first business when I was 19, I was in the gym at 6am in the morning, and I finished at 10.30 at night, and I did it seven days a week…”

    Most people simply don’t have that option. We work for one employer, 9-5ish, no chance of paid overtime. I’d have happily spent extra hours in my 20s working (and being paid) 60-hour weeks, but very few employers offer that. Partly because, as pointed out on the Corbynomics thread, there are diminishing returns to hours worked in many jobs.

    Finding a secondary job to fit around primary job hours isn’t easy either. As an employee you’ll be unreliable, because every time there’s an urgent deadline in the first job, you’ll have to drop the second job. Some employment contracts actually exclude secondary paid employment. What’s a millennial to do?

  24. IIUC this is a 35-year-old complaining about “young people these days”? Don’t you have to be at least 50 for that attitude?

  25. Strange no-one’s mentioned the greatest factor influencing house prices. Credit creation by the banking system.

  26. @dearieme

    Sure. I chose my location and accepted a lesser property. I made my trade off and I’m not complaining. Once you get outside of the inner suburbs the top edge drops off prices. Geelong isn’t cheap, but I’d get more for my cash. But I’d live in Geelong. I’d be a log and crowded commute from anything fun. And I’d be in Geelong. The point is that I had to be doing very well for myself to be able to make that choice.

    Median prices in Geelong are still north of $500k.

    @ Ironman
    Sydney is, I think, one of the most expensive cities in the world. Maybe 30%+ more than Melbourne. Perth has gotten cheaper since the end of the mining boom… it rides that wave… and the city isn’t a patch on Melbourne or Sydney in the ‘fun things to see and do’ stakes.

    The other cities are a notch or two cheaper because they’re not as desirable. Just like Liverpool is cheaper than Manchester. Brisbane median is around $550k (similar to Perth, now).. but that’s being dragged down by a glut of shitty apartments, There are satellite towns around Sydney that are cheaper, but employment prospects are worse and you need good health insurance because you’ll get stabbed a bit.

    Australia has a cultural attachment to the ‘house on a block’ and higher density development is limited to small areas. Melbourne has some big pockets of high-rise but the quality is mainly poor because it’s all financed by investor buyers (local and overseas.. lots of Chinese money here). Owner occupiers lose out because established houses are ludicrously expensive (median price is $800k in Melbourne and $1.1m+ in Sydney) and quality apartments are hard to find (and, therefore, also expensive.. mine being an example).

    The market responds to all the usual things… employment, schools and transport are chief amongst them. Sydney has a shortage of space due to it’s geography. Melbourne less so.. it goes on forever.. but commuting from the outer suburbs into the centre is like commuting from the midlands to London.

    The young want to live in the ‘inner suburbs’ because there is stuff happening… the endless residential blocks further out are no fun.. and still expensive. But even the prime inner suburbs have vast swathes of space taken up by low density houses. They’re pretty, but also often shabby (they’re the old Victorian worker terraces) but you’ll need $1.5m to get one anywhere near me.

    Stamp duty is a major source of revenue for state governments. There are exemptions for first time buyers, but they drop out at around $500k anyway. The incidence of stamp duty is on the seller, but the cashflow is on the buyer.. so it’s another chunk on top of your deposit.

    Australia is very urbanised, but the cities are vast. London is 600sqm, Melbourne is 4,000… with less than half the population. Prices towards the middle reflect this. “Only 50km from the city” is not an unusual thing to see on a development billboard. There’s no way to look at that and not see that the planning system is fucked. The market adds that to its own issues (dumb tax distortions, political bias etc) and throws out the prices it does.

  27. People living longer, consistently high immigration for the last fifteen years or more, divorce increasing the number of households etc.

    Plus:

    1) Govt. deliberately keeping interest rates low in order to maintain the illusion that the middle classes are millionaires.

    2) Banks being allowed to lend out at many multiples of salary and combined incomes. All it’s done is inflate prices.

  28. Australia has a cultural attachment to the ‘house on a block’ and higher density development is limited to small areas. Melbourne has some big pockets of high-rise but the quality is mainly poor because it’s all financed by investor buyers

    I lived in Eureka Tower, it was magnificent! 😀

  29. @Ian Reid
    I have a friend who is going to be 45 and still living with her mum. For 20 years prices have been rising faster than she can save.

  30. @Ian Reid
    I have a friend who is going to be 45 and still living with her mum. For 20 years prices have been rising faster than she can save (about 200k rise for a starter home in that time). She probably could have saved more, but the 200k was a factor).

  31. @Tim Newman

    The Eureka penthouse was up for sale a while back. Out of my range by about $20m… but it sure looked purdy.

    I’ve never been in any of it’s apartments.. but, if only due to it’s age and architects, them to be a cut above the shitboxes that now surround it.

  32. A few other actions which might help:

    1. Change in taxation to favour investment in Assets other than property (so abolition of stamp duty on shares)

    I agree, we need lower taxes on income, capital gains, etc., and much higher taxes on land ownership.

  33. “…and much higher taxes on land ownership.”

    That’s fuckin’ insane!
    Government encourages massive credit creation causes inflation of land/property price inflation.
    Government taxes the inflation.
    Why simply not feed the credit into the market?

  34. @BiS

    Insane? On the contrary, land taxes (on ownership, not trading) are the least worst taxes possible. I agree that government encouraging massive credit creation is a problem, were I Chancellor of the Exchequer I’d soon be stopping that.

  35. Abolish all planning permissions, if you own a piece of land you should be able to build whatever you want on it.

  36. @ed
    so the answer to too high property prices is to give the government money? You are Richard Murphy trolling & I claim my 5 quid.

  37. @BiS

    Yes, the solution to too high property prices is to tax landownership more so speculation in land is reduced and so that productive activity can be taxed less. We are paying this ‘tax’ anyway, just to private land owners at the moment. LVT is an issue that has had supporters (and opponents) across the political spectrum, including Churchill and Adam Smith, e.g.

    http://www.landvaluetax.org/current-affairs-comment/winston-churchill-said-it-all-better-then-we-can.html

    PS: I’m not Richard Murphy, so no 5 quid for you, sorry.

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