Next week, a disappointed man and his family are flying out to a new life in Seattle, Washington. They came to Australia seeking new opportunities in a high growth economy. They love Australia, love Melbourne, but have been driven away by land prices that would consume their lifetime earnings.
This couple are rational adults. They are educated, adaptable and capable people. Ideal workers. Nation builders.
They make a combined income of over $450,000. ‘John’ is an IT contractor and ‘Jane’ a digital brand manager. Their skills are sought everywhere they go.
‘John’, a member of our facebook Don’t Buy Now! community emailed his goodbyes, with a swipe at Australia’s economic settings. Here is his story:
“My wife and I have two young children ages four and six. We have been active in the community and built many friendships that we will be leaving behind. We are paying, at our expense, to move home as we find the cost of living here outrageously high starting with house prices. Prior to moving to Australia, we bought a home outside of Seattle, nice and roomy, in a great school district, and roughly a twenty minute commute to Microsoft Corporate Headquarters (one of the largest employers in the area).
“Normally, I don’t like to talk about how much I paid for things as I find it very gauche. In this instance, I will tell you we spent $600k for this house. The same money would buy a two bedroom apartment in my current suburb.
[David here.] John’s house is similar to this one, if anything a little better. It is in excellent condition on almost an acre. It would be a pleasure to pay a mortgage of $2,500 a month to live here. Back to John.
”I am currently renting a very nice home in Port Melbourne at a cost of $4,780 per month. I love this house, but I have been told it would probably sell for $1.6 – $1.8M. In my humble opinion, that is obscene. Added to which, I know the landlords are more or less paying for us to live in their house as what we pay covers maybe half the mortgage. The price to rent ratio is so far out of whack that denying there is a bubble seems impossible.
[David here.] John’s Port Melbourne rental would be above this standard, on a giant 300 square meters. Back to the action.
“I attended on auction on Saturday in Port Melbourne a few minutes walk away. The house being auctioned was right on the beach and it was very, very nice. However, the starting price for the house was FOUR MILLION DOLLARS. If the ask was half of that, somehow, I could at least comprehend it. I walked away in shock wondering how many people could possibly afford that. I looked around on sites including www.ziprealty.com and www.zillow.com at what $4M would buy in the USA . Mansions in some of the most exclusive neighborhoods including Beverly Hills, Hermosa Beach and Malibu are all available for much less.
”Again, I don’t usually talk about this, but for the sake of documenting the story and our decision to leave I will be 100% honest. With our combined income, on paper, I think would put us in the top 1% of all earners in Australia. We have cut our lifestyle to the bare minimum. We share a single car between the two of us. We rarely go out to eat. All of our money goes to rent, childcare, and groceries.
”I grow increasingly tired of comments I read that say, “Don’t expect to buy a property close to the city right away. You have to sacrifice everything for years to buy a property. Let the property appreciate and then get a better property.” For starters, I don’t think you need much convincing that this is a Ponzi scheme. Next, if my family cannot afford to live here, then no one else can. This kind of sentiment, to give up everything and work up the “property ladder” shows the common foolhardiness that earning money isn’t important. This twisted logic believes that property always appreciates and equity keeps on rolling up the “ladder”. Having lived through a much smaller property bubble in the US, I find this line of thinking laughable. Homes are a form of consumption, not investment. At best, they are a hedge against inflation, but to think that houses can generate real income (versus nominal) is not rational. The situation here is now precarious as I feel the country is ill prepared for the devastating consequences that a housing bubble pop will bring. All I hear is Australia is different, our banks are better, or that’s how it is here. It’s not.
”I really don’t want to sound like I do not appreciate everything I have here and we are very fortunate to be able to earn above average incomes. However, I feel like we have to make a choice – are we going to stay or go? Since I don’t feel we can afford to live and the economic future of this country is dubious at best, we have chosen to leave.
”I am an admirer of what Don’t Buy Now! is trying to accomplish and would gladly do anything to help.”
[David here.] This is another cost of The Great Australian Land Bubble – the expulsion of our best and brightest. This family will now make their contribution, pay taxes and raise their children elsewhere. For Australia, an out and out loss.
Not everyone has the options available to John and Jane, young enough to migrate, with transferable skills and a clear understanding of life economics. But recognise their actions are a direct consequence of the strenuous efforts of government, financiers and the property industry to keep land prices high and average citizens in life-long debt-slavery.
We may not be able to leave so easily, but there is an action everyone can take: Don’t Buy Now!