A newly created property tool, the Smashed Avocado Index, shows that Millennial first home buyers would have to skip breakfasts out for decades in order to save for the typical 20% deposit.
Analyst Scott Shuttleworth of consultancy Montgomery Investment Management took the average price of a smashed avocado breakfast (around $13) and calculated the length of time it would take for young first home buyers in each capital city to save for a deposit if they didn’t go out for a smashed avo on toast.
The index was created as a response to Bernard Salt and other mentions in the media as a literal extension of claims that Millennials were wasting money on avocado on toast instead of saving for a home, he told Australian Broker
Even if the $91 of savings (seven avo breakfasts per week) was dropped into a high interest account with 5% interest, Millennials would still have to save up for the following length of time to get the 20% deposit required for the median house price in their capital city:
- Sydney (22.3 years)
- Melbourne (17.8 years)
- Brisbane (14.8 years)
- Adelaide (13.4 years)
- Perth (15.0 years)
- Hobart (11.9 years)
- Darwin (15.0 years)
- Canberra (17.3 years)
Furthermore, these figures don’t take into account the rise of prices while the potential buyer is saving up and skipping the avocado, Shuttleworth said.
“It’s all tongue in cheek because no one’s going to save for 20 years for a deposit but it was interesting to look at.”
As consumers have a certain amount of income, Shuttleworth said it was not a case of money being wasted on items such as smashed avocados.
“You can choose what you would like to spend on from the different things out there. Naturally, you’re going to try and get the biggest amount of utility for every dollar that you spend. One thing you could do is save up and buy a deposit and there’s a certain utility profile that comes with that. It has nothing to do with purchasing food you like or some other items or experiences.”
In essence, consumers are simply trying to get the highest ‘value’ out of their money for a given level of purchase, he said. In an environment of high house prices, people may see that and look to other items like smashed avocado to optimise their utility structure.
“If you want to see a higher uptake in Millennials buying houses, perhaps the prices need to ease up a bit or they need to actually be more affordable.”
On the topic of smashed avocado, Shuttleworth said he had his first last weekend.
“It wasn’t as good as it was cracked up to be, I will say that.”
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