An Australian property developer thinks millennials could afford homes if they stop buying hipster food. Reality is more complex
Blame it on brunch.
At least that’s what Australian luxury property developer Tim Gurner seems to think. The 35-year-old millionaire is under fire for implying that other young adults can’t afford to buy homes because they’re splashing all their cash on hipster food at cool cafes.
“When I was trying to buy my first home, I wasn’t buying smashed avocado for $19 and four coffees at $4 each,” he told news program “60 Minutes Australia,” adding that it was not surprising that “when you’re spending $40 a day on smashed avocados and coffees and not working” you can’t afford property.
The claim misses the mark. Just check out a nifty mortgage-to-avocados ratio calculator created by Canadian journalist David Rudin. According to the calculator, a New Yorker who abandons her daily avocado toast habit today – and saves all of that money – still wouldn’t be able to afford a 20% down payment on an average-priced apartment in the city until 2073. Meanwhile, someone living in San Francisco willing to give up 26,000 brunches would have to wait until 2088.
The real issues preventing millennials from buying homes are much larger. For one, the weight of student debt has escalated exponentially. By some estimates, the average young adult left college with $6,500 in debt in 1990. Last year, they owed $37,000. “The amounts that millennials are paying back are what previous generations spent on mortgages,” says Katharine Perry, associate financial consultant at Fort Pitt Capital Group.
Millennials also make less money than their parents. After adjusting for inflation, young adults in 2013 made $2,000 less than those of a similar age in 1980. And that’s despite many taking on second and third jobs in the gig economy. “The notion of a side hustle didn’t exist a generation ago,” says Kimmie Greene, consumer finance expert at Mint. “Millennials are figuring out how to monetize their hobbies.”
Many millennials who can afford to buy also choose not to. Triplemint real estate broker Boris Sharapan Fabrikant says that his millennial clients often opt to rent because they don’t want their money tied up in one place. “Buying a house prevents them from enjoying things like expensive trips and nights out that they prefer,” he says.
Still Gruner is not entirely wrong. Millennials do spend more on to-go items like sandwiches and coffee than previous generations. According to a TD Bank study released last year, millennials spend on average about $80 each month on to-go coffee and food. By contrast, Gen Xers and Baby Boomers only spent $67 monthly. In almost every other category however, millennials spend less. The average U.S. consumer splashes out $32,000 each year on expenses including apparel, entertainment and regular bills. Millennials? A mere $26,000.
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