Adam Piggott

Gentleman adventurer

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

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.



How to make relationships work.


Podcast #66 – The Tonic Masculinity episode.


  1. Adam T

    I doubt there’ll be a collapse, just a dip. There is too much immigration for it to drop by much.

    • And probably not just immigrants. New York City’s mid and high end market has been propped up by Russians purchasing real estate to move money out of the country; similarly, Chinese investment in California’s LA and Silicon Valley. All three markets are robust for structural reasons, but foreign money keeps the heat up.

  2. David Moore

    There is a difference between Rich and Wealthy. The former only know how to spend, the later can keep hold of it.

  3. MatrixTransform

    all that immigration is also what keeps yr wage low. Think about that.

    So, either they bring gold in their socks, or Uber Eats pays way more than I thought.
    Who knows

    anyway, I remember this same old story from 1989 when I bought a house.
    Lived the crash we apparently never had including the subsequent 30% fall and the record high interest rates.
    Avocado wasnt a thing back then.

    Sailed through the 2000s, but got deeper in debt due to renovations.

    Also remember 2010-11 selling a house (divorce) … and watching it fail at action and eventually go for 10% less that than it would have a month before.
    That was when prices were relatively normal (though crashing 30-50% in other parts of the world)

    I remember looking at solidly built shit-hole about 12 months ago in a Melb each side suburb go for $900k …and now, a year later even shittier shitholes are going for $1.2M

    If yr smashed Avo goes up 20% each year and yr electricity goes up and wages stay low … its bad right?

    But if yr house goes up …its good?

    You’all been brainwashed.

    Stop spending and start the crash … sooner the better

    • While crashes are theoretically good and healthy for an economy, they aren’t real world good for people. A lot of individuals are going to get caught upside down in their mortgages and foreclose, which causes the municipalities to lose their tax base and raise everyone else’s taxes. Banks will not be able to unload the houses, which means they can’t afford new mortgages, so the entire housing market will be landlocked for a decade or more.

  4. People that gripe about the cost of real estate being unfair are either highly ignorant or holding out their hand asking for a handout. (Somebody should do something, Government Overlord!) Real estate prices are based on what people are willing to pay for them. Just because you don’t like it doesn’t mean someone else doesn’t consider it reasonable. When it gets too high, people will stop buying the property and prices will either stabilize or crash. I agree with your solution. If you don’t like the prices, move somewhere more reasonable.

  5. MarkT

    This issue becomes a lot clearer if you accept that in general real property values have not risen in recent decades, it’s that the value of fiat currency has decreased, due to inflation of the money supply promoted by central banks. When you borrow say $500,000 to buy a house, and that house is worth $1m in 10 years time – it’s not that the real value of the house has doubled, it’s that the value of the money you owe to the bank has halved.

    • MarkT

      A postscript to my earlier comment: Precisely because most property price inflation has been driven my monetary inflation, what you are saying is only partially correct – and the comment about saving $25,000 over 10 years being a waste of time is also partially correct. It’s not the way it should be in a sane world, but it’s the way it actually is, and something you need to appreciate if you want to get ahead.

      $25,000 saved 10 years ago will only be worth $12,500 now, as most of your interest on investment is consumed by taxes. By contrast if you put down your $25,000 down as a 10% deposit on a $250,000 real estate purchase, your property today (at least in Aus & NZ) is likely to have a nominal value of around $500,000. Even if you’ve just paid interest and still owed the bank the same $225,000, you’ve still gained $275,000 of equity in current dollars. Or to put it in other words (which I’m suggesting we should to be more accurate), the value of that debt you owe to the bank has halved, even though you’ve paid none of it off.

      For that reason, in the current environment, and so long as trends continue, saving money by putting it in a bank is a suckers game. You’re effectively allowing the government to transfer your wealth via inflation to property speculators.

      Of course this can’t go on forever, and a correction will come one day in some shape or form (perhaps in the currency collapsing). But I’ve been hearing for 20-30 years that a major correction is coming, and if I’d taken that to heart and followed your advice, I’d be a lot less well off then what I am now.

  6. JohnR

    Good article. Incidentally, in case anyone’s thinking of buying in Australia, that boom is limited to Sydney and Melbourne. Perth has been stagnant for a decade. Over here we’re wondering “Boom? What property boom?” Queensland’s much the same.

  7. So you want to buy a house? Throw out everything you have been told, or think you know and start from scratch. I have bought and sold houses, built them, remodeled them, borrowed money against them, rented them to people, and held notes on them to buyers. I have found out one simple thing; most people have no idea what they are talking about when it comes to this. Do your own research and learn for yourself.

    “It’s an investment.” If you like one of the worst investment vehicles there are then this one is for you. A spreadsheet is your friend. Look at the payout value over the life of the loan, factor in inflation, property taxes, insurance and any capital gain taxes there might be and you have a start. Use a factor of 1% of the median house price where you are per year for maintenance and upkeep.

    “Remodels and upgrades pay for themselves.” You’ll never see it because for the most part they are fads. How much is that gold coated hula hoop worth?

    There is a lot more, but this comment is too long already. For me there is only one sound reason to buy a house, if you take Adam’s advice about location and saving. It is probably the lowest cost method to shelter and raise your family in a high stability environment.

  8. Mr Black

    Bubbles last as long as there is new money entering the system and the high immigration quotas are there to ensure that the new money always does enter the system. When there are more high net worth people in China that the total population of Australia, they can out-bid and out-buy everyone here for anything they want. Turn that tap off and the property market will collapse back to its real value. Immigration policy is the one to watch for signs of an end to this. But frankly, I don’t expect there to be any changes to this situation because of the tax windfall that comes from high property prices, in addition to the happy bonus that people are now expected to sell their house to afford retirement and that takes even more pressure off the treasury.

  9. MPH

    It’s worse than it looks, 70% of GDP is ‘Services’, so the ratio of housing to the productive economy could be up to 12 times.

  10. MatrixTransform

    …bad news for avocado growers and real estate agents alike

  11. If retirees are not to starve, then the still-at-work *must* pay for their upkeep, one way or another. The way it’s being done is via the generational theft that is the property market. They don’t dare let the housing bubble pop because the Baby Boomer’s retirement savings are tied to it: a side-effect of the privatisation of the old age pension.

    It’d all be unnecessary if there was a universal basic income.

    • Mr Black

      You mean socialism will save us. Peddle that shit somewhere else.

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