How much does Avocado really cost homebuyers?
The media and public alike have had a great time discussing developer and property investment expert Tim Gurner’s 60 Minutes interview. He made the comment that today’s young people might never own a house. You already know the rationale behind the statement – those millennials are spending $40 a day on smashed avocados and not working.
Maybe you think Gurner is onto something here or perhaps you see it as a sweeping generalisation. Either way, Mr. Gurner’s logic has certainly made for an interesting discussion. Taking his claim at face value, let’s have a look at how much avocado is really costing you.
$40 a day is just not sustainable
Assuming millennials are spending $40 a day on smashed avocado toast and coffee, that’s about $280 a week. Annually, this brings your brunch spend to $14,560. That’s a pretty considerable amount to be spending on one meal a day. Over a standard 25 year loan term you are looking at $364,000 spent on brunch. Crunching the numbers like this, you can see how Gurner could make such a claim.
Remember though, these millennials are also “not working.” $14,560 a year is a huge cost for someone that’s unemployed! Although it does explain why these people are free for brunch every day. Even though most unemployed millennials would qualify for the Newstart Allowance of $501 a fortnight, or $250.50 a week, there is simply no way these people could spend $280 a week on anything.
Assuming they are employed, a 40 hour a week minimum wage job will amount to around $28,300 after tax. The median Melbourne house price is $826,000 (March quarter 2017) as reported by the Real Estate Institute Victoria. This means, it would require slightly less than four brunchless years of saving over half of their post tax income to put together the bare minimum 5 per cent deposit of $41,300 required for a first homebuyers loan.
It shouldn’t be an issue to secure a home loan, assuming avocado toast is your only outgoing!
Let’s assume that each piece of avo toast requires 60 grams of mash to be an appropriately satisfying brunch. For two pieces of toast this is equivalent of about one small avocado a day, weighing about 200 grams. This means that an average Australian man aged over 18 would eat his weight in avocado every 430 days, while the average female would achieve the same in just under a year.
Money saved instead of spent on brunch could be a great thing for Australia’s avocado market. If these millennials were to save their brunch money for a house, each would be freeing up over 1,200 avocados across the four years of saving. With that kind of supply, prices are sure to eventually dip below the $3 mark.
According to the United States Department of Agriculture, Aussies spend 9.8 per cent of their household income on groceries. Additionally, Finder has recently reported that the average Australian household spends around $100 per week dining out.
These are interesting statistics, yet no matter how you might skew them, they won’t add up to the outlandish claims of $40 daily brunches. With Gurner’s insinuation that most millennials won’t own a house until wealth is passed down from their boomer parents, perhaps these regular cafe visits are merely Generation Y biding their time?
The solution is not to avoid brunch, despite what Mr. Gurner would have you believe. The truth is that real estate can be a tricky market to bite into. First homebuyers have a myriad of considerations to make regarding that first step onto the property ladder.
Before you skip a meal, get in contact with Beyond Bank to discuss home loan solutions to suit you.