The Australian property bubble – you don’t save money by spending it

I’m so delicious, you don’t need a house.

Earlier this year I was interviewed on the Dingoes podcast where I had a somewhat tumultuous exchange with the main host. We disagreed over the cost of living for the average Australian in Sydney and Melbourne. His point was that it was all the fault of the boomers. My point was that it was up to each individual to do something about it. The exchange became quite ludicrous when he attempted to state that saving $25,000 in 10 years was useless because that sort of money “was nothing”, or words to that effect.

I had come up with that figure by calculating the average saving from not spending $50 on smashed avocado breakfasts, a particularly popular Millennial dish that was the focus of attention last year when commenter Bernard Salt used it as an example of the profligacy of young people who simultaneously complain about the cost of real estate while enjoying a lifestyle suited to those who have already made it.

Any justification for such behavior seems acceptable, such as claiming that 25 grand is nothing at all. Of course it is nothing when you have chosen to live a lifestyle where such money will slip through your fingers like treacle. Any fool can make money; the real secret to wealth lies in not spending it. This is the old fashioned and unfashionable concept known as saving. Such a concept is anathema to people who have been raised with the expectation that they are the center of the universe, that the world owes them a living, and they can “have it all”.

The same attitudes reside in the socialist left and the welfare state. How else can you describe the attitude that $100 a month of free money from taxpayers is not real money?

“The reality is this: Low-income families already pay zero federal income taxes, and the $100 a month they’ll get through the GOP Senate plan comes from an increase in existing tax credits, which are in effect an income subsidy from the government. So the Republicans are literally proposing that taxpayers give $1,200 a year to poor families, and Democrats are denouncing this free-money-for-the-poor plan.”

Staying on welfare is a victim trap. Blaming the Boomers for your own economic reality is also a victim trap. I have no time for victim hood. Take responsibility for your own actions and your own personal situation and take back your own personal power. This abdication of personal financial responsibility is just as evident on the right as it is on the left; it just takes different forms. If you’re blaming someone or something else then you are a loser.

By the way, yes this includes blaming the government. You keep voting for them. You elect to remain in such an environment. And this was the other argument that I had with The Dingoes; if real estate prices are so awful in Melbourne and Sydney then just move to another part of the country where the prices are more reasonable. Their response? Utter horror that they might have to surrender their inner city lifestyles and move out to some sort of squalid regional city or town.

As someone who has lived and worked on four continents I am a big proponent of the idea of getting off your bum and setting off for new climes if you can’t make it work where you currently are. Like what is happening right now in California.

“The rent steals so much of your paycheck, you might have to move back in with your parents, and half your life is spent staring at the rear end of the car in front of you.

“You’d like to think it will get better, but when? All around you, young and old alike are saying goodbye to California.

“Best thing I could have done,” said retiree Michael J. Van Essen, who was paying $1,160 for a one-bedroom apartment in Silver Lake until a year and a half ago. Then he bought a house with a creek behind it for $165,000 in Mason City, Iowa, and now pays $500 a month less on his mortgage than he did on his rent in Los Angeles.”

Like California, Sydney and Melbourne are over-populated shitholes, drowning in a flood of immigration from India and Asia. Their infrastructures are massively overloaded, while their regional footprints are amongst the largest in the world. The median house price in Sydney is almost $1.2 million while Melbourne is $865,712.

Anyone buying into this lunacy is out of their mind. Australia’s property boom has lasted for over 55 years. This is why Australians collectively believe that property prices never fall, because for most people they never have in living memory. Earlier this year there was a rush of articles in major Australian newspapers decrying the very idea that a housing bubble might exist. But as 2017 draws to a close some publications are beginning to sound the alarm.

“After five years of surging prices, the market value of the nation’s homes has ballooned to A$7.3 trillion ($5.6 trillion) — or more than four times gross domestic product. Not even the U.S. and U.K. markets achieved such heights at their peaks a decade ago before prices spiraled lower and dragged their economies with them.”

Young people might feel happy at the thought of house prices collapsing, but such optimism is entirely useless if you find yourself in such a dream market but you neglected to save your pennies so as to take advantage of such an event. If you don’t have money saved up you will discover that credit availability in such an environment will be very scarce. Cash will be king and that $25,000 that you dismissed as being nothing of value will in fact be quite desirable indeed.

I’ll say it again: the secret to money is in not spending it. The coming property collapse in Australia will be a huge opportunity for those who had the prescience of mind to not follow the herd and indulge in $50 smashed avo breakfasts on a regular basis. But for those who persist in such stupid indulgences, I wonder on whom they will lay the blame this time.

This article was originally published at, where Adam Piggott publishes regularly and brilliantly. You can purchase Adam’s books here.

Photo by ultrakml

  • belt fed 7.62mm

    Saving is by far the best option. Although I will still blame the government. Tax on interest earned is too high. They should not be a hindrance to good financial strategy such as saving up.

    • Caitlin1488

      Our Government is re distributing wealth, through low interest rates.

      Homeowners, those with a mortgage are having free money printed for them and are becoming richer via the rising value of their home.

      Savers are being punished with very low interest rates that rob them of wealth.

      Rob the poor, give to the rich. Coalition policy.

      • belt fed 7.62mm

        Also labour and greens policy. I don’t blame them, they have no choice it’s what master Soros wants.

  • sadsak

    Remember, there is no good debt.

  • entropy

    I agree, staying on welfare is bad. So let’s axe pensions altogether and screw the Boomers who didn’t exploit the property ponzi scheme they set up for themselves.

    Then we won’t have young people saving to pay for their own retirements while also supporting the welfare of a top-heavy demographic that screwed them at every turn. We’re just cash cows to these scum. And now they want increased immigration to pad out their pensions because they don’t care about the future of the country, they only care about themselves.

    Saving is such a great option when the RBA had been artificially depressing interest rates for a decade, isn’t it. Why should young people be rewarded for saving when instead we can protect the property monopoly of overextended Boomers by excusing them from the consequences of their debt.

    I can earn a whole 1.5% interest on my savings? Oh, thank you massas! I promise I won’t spend it on avocado.

    • clemilf

      Err, it is not expected to earn amazing interest, but to provide you an opportunity to buy when property corrects to the historical mean (which is 1/6 of present “values”), as Adam stated in the article, Delayed gratification, if you will.

      • entropy

        Well you guys got amazing interest in the 90s. Why shouldn’t we get amazing interest? Because you’re screwing us to protect your investments? Well that’s fair, isn’t it. We’ll just enjoy the privilege of having to wait through an absurdly long artificial interest cycle while PAYING YOU RENT on properties we’re also subsidising by getting no interest on the money you criticise us for not saving?

        Thank you for dat wonderful opportunity massa.

        • Sir Cumference

          You do get amazing interest. 4% on a home loan. My parents were paying as much as 18% and made it work.

          • entropy

            18% on a fraction of the debt.

            4% interest on a rip-off is still a rip-off.

          • Sir Cumference

            18% on a fraction of the wage.

          • entropy

            Oh, snap. Great counter, Grandpa. You sure showed me.

          • Sir Cumference

            Grandpa? Nup miles from it. I guess your situation will always be someone else’s fault huh.

          • entropy

            What always? Sometimes things are other people’s fault, Aristotle. And you’re doing a shitty job explaining how it’s not.

          • Sir Cumference

            More beneficial for me to pass generation scum’s words of wisdom onto those that refuse to wallow in their own self pity.

          • entropy

            Ah, the ‘wisdom’ of someone who thinks all fractions are the same.

            You do make a good representative of generation scum.

          • Sir Cumference

            Oh the irony of your ‘fractions are the same’ comment.
            Par for the course coming to you live from generation victim hood.

          • entropy

            Looks like you’re as good with irony as you are with economics.

          • Sir Cumference

            Are you not the one still renting?

          • entropy

            My savings are invested in assets that aren’t likely to depreciate by 80% overnight.

            But by all means, continue your economics lecture, Professor.

          • Sir Cumference

            All your eggs in one basket huh! Clever.

          • entropy

            LMAO. Thanks for making my case for me, Professor. The prosecution rests.

          • Sir Cumference

            I think you meant the prosecution rents.

        • Caitlin1488

          The Government is fucking us over, as usual.

      • Caitlin1488

        Adam ran away to Holland because he couldn’t stand Australia anymore.
        I can understand his outlook.

  • entropy

    Don’t go all shy on us, Adam.

    Welfare is bad, so you support abolishing the aged pension. Right?

    Or is welfare only bad for young people?

    • Adam Piggott

      All welfare should be eliminated. People should rely on themselves, their family, and their local community in that order. Charitable organisations with zero government funding should take up the slack.

  • Ron Mortimer

    What many don’t recognise is that housing prices are controlled by government, it is as simple as that. The Federal Gov controls immigration, AKA demand, State governments control land releases AKA supply and the Reserve Bank controls the amount of money chasing available property via interest rates.

    The only reason anyone would pay the prices asked is that it is a pretty good bet that whatever is paid it will be 20+% more in five years time.

    The real question is why are all levels of government colluding in all this. Who benefits?
    Banks benefit greatly as appreciating real estate collateral on their books improves their balance sheets. And at no risk to them as if it all goes tittsup they will be bailed out(with taxpayers money or guarantees).
    Governments like it as it improves the mood of the electorate coz we all feel richer when we are sitting on inflated assets.

    Nearly all people making decisions about real estate policy are real estate owners themselves so it can hardly be expected that they would act to lower land values.