A young influencer has attacked the perception that “lazy young people who drink lattes” should be saving for a mortgage deposit.

Jack Toohey has made a video looking at the differences between buying a home in 1983 and 2023, arguing that older critics didn’t appreciate how easy it was to buy a first home four decades ago.

Baby boomers often laugh at the “avocado toast” generation’s complaints about interest rates “soaring” to four percent, when they managed to buy houses with mortgage rates of 18 percent.

Toohey, however, says they often fail to mention that house prices were much cheaper back then, not just in inflation-adjusted real terms, but compared to median income at the time.

The founder of Sure Studios, a creative content and production company, has sought to expose those misleading criticisms of his generation by using numbers to compare real estate values ​​and earnings then and now.

‘Let’s go back in time to buy a house. In 1983, I am an average person looking to buy an average home,” she said.

Toohey, dressed in 1980s clothing to make the point, reviews income, living expenses and property prices in 1983.

TikTok user Jack Toohey (pictured) argued that it took a person two years to save for a 20 percent deposit in 1983 after calculating a person’s average annual salary against rent, taxes, and home prices. the house in 1983.

In 1983, a house in Sydney cost less than four times the average full-time salary for someone with a 20 per cent mortgage deposit.

House prices: then and now

SYDNEY: The median home price was $81,425 in 1983 compared to $1,293,529 in May 2023.

In 1983, a person earning a median income of $18,288 on a 20 percent deposit owed the bank 3.6 times what they earned.

In 2023, a person with a median income of $94,000 with a 20 percent mortgage deposit owes the bank 11 times what they earn.

It would take a couple earning $108,000 14 years to save for a loan deposit.

The Australian Prudential Regulation Authority considers it dangerous for anyone to have a debt-to-income ratio of ‘six’ or more.

MELBOURNE: The median home price was $52,500 in 1983 compared to $911,007 in May 2023.

In 1983, a person earning a median income of $18,288 with a 20 percent deposit owed the bank 2.3 times what they earned.

In 2023, a person with a median income of $94,000 with a 20 percent mortgage deposit owes the bank 7.8 times what they earn.

It would take a couple earning $98,852 11.4 years to save for a mortgage deposit.

Sources: Macquarie University, CoreLogic, Australian Bureau of Statistics Ordinary Time average weekly earnings.

In Australia’s most expensive city, someone buying a house with a median price of $81,425 only needed to save $16,285 for a deposit, less than the annual salary of $18,288 in October 1983.

By comparison, the typical suburban house in Sydney now costs $1.293 million, which is 11 times the median annual salary of $94,000. That means a deposit of $259,000 and a loan of just over $1 million.

Saving for a mortgage deposit now typically takes 14 years for a Sydney couple earning a six-figure salary, and even in marginally more affordable cities like Melbourne, Brisbane, Canberra and Hobart it still takes a decade, according to an ANZ-CoreLogic report. . .

Toohey has compared national property values ​​in 1983 and 2023, showing figures from the Australian Bureau of Statistics and the Australian Tax Office, in text boxes above the video.

Moving from Sydney to Australia in general, he said the typical Australian house cost $64,039 in 1983, when higher education was free, and the median annual income was $19,188.

That meant someone with a 20 percent mortgage deposit of $12,808, who owed $51,231, had a debt-to-income ratio of just 2.7. That was well below the banking regulator’s ‘six’ threshold for mortgage stress today.

‘In 1983, I am an average person looking to buy an average home. I have this average degree that I got for free, and I have an average job,” she said.

‘After paying taxes and rent, I have a disposable income of $12,315. If I save 50 percent of the rest ($6,157), it will take me two years to save 20 percent of the deposit. Remember that!’

The video then cuts to Toohey ‘going back’ to 2023, where he explains the financial situation of young Australians.

The median house price in Melbourne is now $911,000, which is 7.8 times the median salary with a mortgage deposit.

A generation ago, Melbourne’s median price of $52,500 was just 2.3 times the median wage.

Toohey explains that the average annual rent in 2023 is $28,600, the annual tax is about $20,008, and young Australians who hold a degree have an average Higher Education Contribution Program debt of $23,658 with an average annual refund. of $5543.

‘After paying taxes, rent, and HECS, I have a disposable income of $36,835. If I save 50 percent of the rest ($18,417), it will take me 10 and a half years to save the 20 percent deposit.’

“Clearly it’s not just lazy youngsters drinking lattes that are causing the problem.

Toohey applied the same formula to the average person wanting to buy a home in 2023 and found that it would take 10 1/2 years to save a 20 percent down payment. He claims the housing market is broken and “lazy young men drinking lattes” are not the problem.

Toohey added that skipping a latte every day would save so little money that it would take 84 years to add up the cost of a house deposit, whispering to the camera: “I don’t have 84 years left.”

‘In 40 years, the median home price has increased 14 times, while full-time wages have only increased 4.7 times. Houses used to cost three times your salary, and now they cost 10 times.’

“All things being equal, you’d have to be making $300,000 a year to benefit from that same three-fold ratio,” Toohey says.

“You might be thinking $90,000 ‘wow, that’s high.’ Is! That’s because CEOs and vice chancellors take home millions and inflate the total revenue pool and skew the average upward.

If we look at the median, that’s the number in the middle of all the numbers, that’s around $48,000. So if you’re earning more than that, you’re earning more than 50 per cent of all workers in Australia.

‘And yet, housing is so far out of reach. There is something bigger at play here.

Toohey explained that over the course of four decades, home prices increased 14 times compared to full-time wages, which only increased 4.7 times. House prices in 1983 cost three times a person’s salary compared to 10 times as much in 2023 (file image)

Many social media users agreed with Toohey’s claims and shared their frustration with seniors’ advice on how to save money.

“You couldn’t put it any clearer but I can still hear the 50+ people in my head trying to argue that I recently had one tell me to get three jobs,” one person wrote.

”If you would stop buying those coffees/junk food and save your money, you could buy a house,’ yeah… right,’ another person commented.

A third person chimed in: “I heard this boomer on the radio being asked why our generation can’t buy a house and she says it’s because of all these tap and go.

The fundamental reason for rising house prices is supply and demand: the supply of houses has not kept pace with the increase in Australia’s high-migration population.

In 1983 Australia’s population was 15.3 million, today it is 26.4 million, having passed the 25 million milestone in 2018 some 24 years ahead of schedule by the Treasury.

The Treasury now expects a record 400,000 migrants to move to Australia in 2022-23, putting even more pressure on renters.

Another factor was the increase in life expectancy, from 75.09 in 1983 to 83.94 today, which creates less availability of existing homes, as homes are held longer.

The Reserve Bank of Australia on Tuesday raised the official cash rate by another 25 basis points to an 11-year high of 4.1 percent, marking the 12th rise in just over a year.

Borrowers can expect even more pain in the coming months as inflation remains stubbornly high, with the RBA expecting it to stay above six percent for most of 2023.

The consumer price index is forecast to remain above the two to three percent target through mid-2025.

Reserve Bank Governor Philip Lowe said rate hikes must continue, noting that big wage hikes coming into effect next month will only fuel inflation.

“Inflation in Australia has passed its peak, but 7 percent is still too high and it will take some time before it returns to the target range,” it said in a statement on Tuesday.

Variable mortgage rates are now above six percent, which AMP chief economist Shane Oliver says is the equivalent of 17 percent mortgage rates in the late 1980s because debt as a ratio of revenue is almost three times higher.

Buying a house in 1983 versus 2023

Toohey used data from the Australian Bureau of Statistics and the Australian Tax Office.

1983

Median Property Price: $64,039

Median Annual Income: $19,188

Average annual income: $2,494

Average annual tax: $4,377

Disposable income: $12,315

Higher education was free.

Saving 50 percent of disposable income ($6,157) means it will take two years to save a 20 percent deposit.

2023

Median Property Price: $920,100

Median Annual Income: $90,896

Average annual income: $28,600

Average annual tax: $20,008

Average HECS debt: $23,658, which equates to an average annual payment of $5,453

Disposable income: $36,835

Saving 50 percent of disposable income ($18,417) means it will take 10 1/2 years to save the 20 percent deposit.

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Source: tit.edu.vn