Avocado toast versus buying your first home
The big avocado debate – is saving for a home deposit as easy as going without for a little bit? Is cutting discretionary spending the key to your first home or is saving to buy a home just mission impossible? Do Millennials Stand a Chance at Getting Into the Property Market?
Last month, millennials were up in arms about Bernard Salt’s satirical piece implying that 20 somethings spending $22 on smashed avocado on toast and this being the reason they couldn’t buy into the property market. Salt insinuated, at least that’s how the younger readers understood the message, that if they stopped eating brunch out they could save a deposit for their first home. Social media exploded on the topic. ME Bank jumped on the “avo” wagon and created a marketing campaign based on the notion that you can have your avocado and eat it too.
This is a topic we often find ourselves discussing in the office. Watching house prices skyrocket, and experiencing first hand on a weekly basis the barriers to property market entry swiftly raising for some of our clients, we wonder whether the younger generation and specifically those without help from their parents or an inheritance stand a chance at ever owning a house.
Now we realise that this is a very loaded question and there is a plethora of variables, but we can definitely understand how people just don’t want to even begin saving money for a deposit because the end game seems like mission impossible.
In Melbourne, the median dwelling price is $843,200 and the average monthly income is $4,833 which is under $60,000 per year. According to mozo.com.au and based on Corelogic PRDATA a monthly saving of $1008 which is 21% of income after tax is required to save for ten years for just a 10% deposit. To save a 20% deposit you’ll need to bump up your savings to more than 42% of your income for ten years. It’s noteworthy that median is lower than average, so in fact, there are more people with below average incomes than above average and we know for a fact you’ll be hard pressed to find a house for $850,000 within 15 km of the CBD. You’ll need to sacrifice far more than just brunch at those numbers.
So let’s give up on the house dream for a minute. What about a smaller apartment or buying further out of the city? The reality is that people in their late twenties and early thirties have families, which don’t fit into little flats. They need space and a bit of grass. A commute to work cuts into already scarce family time so buying in the outlying suburbs is often not an option either. So young people are left with very few options. They can rent-vest, which I will write about next week, but finding positive cash flow properties is just another challenge in the property landscape. The dream of working hard, saving hard and buying a home where you can raise a family is a dream of a bygone era.
Buyer Solutions has been helping first home buyers secure properties for many years. Yes its tough but we have lots of strategies to ensure they buy well, don’t overpay and even to assist in moving on the purchase quicker. Maybe make your avocado toast at home, enjoy it but put that extra $15 you save into your property deposit. It all adds up.
For independent advice on buying or selling real estate, contact Janet Spencer at Buyer Solutions +61 3 9816 8555 or email jspencer@buyersolutions.com.au
Buyers Advocate, Buyers Agent, First home buyers, Home buying, Housing Affordability, Housing Market, In The Media, Investment, Investment property
+61 39816 8555