The myth of the “smashed avocado” generation

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By Leith van Onselen

The Australian’s Grace Kelly wrote an article over the weekend attacking Millennials for shunning home ownership. It came after a survey from Deloitte revealed that only 49% of Australian millennials want to own their own home, while only 39% want to have children and start a family. From The Australian:

Our millennials, despite the fact they are approaching middle age, steadfastly refuse to grow up. Of all the generations before them and even the one coming after them (Gen Z, born 1995 to 2002), millennials are the least likely to have children, buy homes and undertake the traditional signals of adulthood “success markers”. And this year they are more miserable than ever…

When it comes to getting ahead, millennials have no interest… But more than any time in recent memory, it will be easier to enter the property market in Australia. Interest rates are low and may go lower, banks have loosened lending criteria, house prices have fallen and the Morrison government is going to introduce a scheme to help first-home buyers purchase with a 5 per cent deposit.

On top of this, there are various state schemes to assist with stamp duty exemptions or reductions and first-home buyer grants.

We are a nation obsessed by property, but it is a fact that home ownership remains the foundation stone of personal financial security. Buying a home is never easy, but the longer it is delayed the harder it becomes.

Take heart, millennials, and do your utmost to get into the market now, and don’t be too proud to start at the bottom. We have all had to do it.

This is a rehash of Bernard Salt’s “smashed avocado” meme and lacks foundation. The fact of the matter is that the housing equation for Millennials is a far more difficult proposition than that faced by prior generations.

The below charts from The ABC comparing age cohorts in 2016 to the same cohorts in 1981 illustrates the “smashed avocado” fallacy.

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First, real median house prices were more than twice as high in 2016 as they were in 1981:

Second, mortgage repayments as a percentage of disposable income were also 43% higher:

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Third, home ownership rates have fallen 26%:

Fourth, real weekly rents have more than doubled, making saving a home deposit more difficult:

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And finally, the percentage of income spent on recreation has actually fallen 18%:

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In other words, Millennials by and large aren’t avoiding home ownership by choice, but rather many have no choice. For Millennials in Sydney and Melbourne, ‘starting at the bottom’ means buying a one bedroom shoebox for $500,000, or living far away in some far-flung suburb with minimal access to amenities or public transport, and enduring hideously long commutes.

No wonder they are depressed.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.