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!
Great piece and great story.
As a Brit who’s been living here for 5-6 years I couldn’t agree more.
I dont normally comment on these things, but I have a three bed flat let out in London, a 10 min bus ride from Oxford Street, which would be half the price to buy today compared to the smaller 2 bed flat I rent in Sydney (for significantly more than the rent on the London flat). There is no way I can bring myself to spend the required money in Australia to buy a house or flat (and yes I have enough for the deposit)!
Factor in the higher cost of living here in Oz on top of the house prices (phone, food, internet, etc, even a coffee!! Eating out here is outrageous!) and my wife and I are planning on heading home.
We’re going to miss the weather though…
PS since the Government removed LAFHA for overseas workers (457 visas) I think you’ll find a lot more highly qualified, mobile, international workers heading elsewhere as well. I have PR, so LAFHA isn’t a factor in my decision making.
I agree. Prices are high in Australia. Leave now. I need less people at the next auction.
I agree that housing costs in Australia are crazy, but for a couple earning in excess of $450k pa to say they have had to cut their lifestyle down to the absolute minimum is absurd. My hubby and I have a combined income that is nearly an order of magnitude lower than ‘John’ and ‘Jane’s, and yet we are able (frugally) to rent in one of Melbourne’s nicest suburbs, and while we rarely eat out or buy new clothes, we are not in debt and do not feel frazzled by money worries.
We can’t estimate land prices in developing countries but land prices are very constant in already developing countries.
Rockeyjohn, your comment doesn’t make sense. We can MEASURE land prices in developed countries through public records and they fluctuate continually. Land prices in developing countries fluctuate considerably, depending on the relative positions of buyers and sellers, harvests and the availability of credit.
Hi David, good post. This is an example of “brain-drain” driven by inflated land prices. It would be interesting if there was a way to measure and quantify how Australian land prices equates with the flight of human capital. Perhaps if there was some sort of “exit survey” for those with one-way tickets out of Australia?
Sounds very familiar I can tell you – Melbourne has become far too expensive and hung up on ‘liveable city’ tags – I lived in Melbourne for 8 years and went from manager to a director of an international listed business and all we spent money on at the end when my wife was on mat leave was our mortgage, feed and nappies! Prices in ACT are much better – I live in Red Hill now, a massively affluent suburb and beautiful to boot, 10 minutes from the city, a stunning 3 bed, top of our street and views forever on 1,000 metres is $750K = life buy for us I tell you and a 5 minute walk / 1 minute drive to as Montessori school or a primary with an international baccalaureate.
Enough said!!
My wife and I are both dualies, but I’m American by birth and she’s an Aussie. We are almost the same as this couple in terms of income and ages of children. My wife is currently resisting, but I want to move back to the US. The expense of living in Melbourne is hugely detrimental to the standard of living that I now believe is higher in the US. I would have laughed at anyone saying that 10-20 years ago. We have health insurance (we have private insurance in Aus, too). Cars are a fraction of the price. too. It was a mistake coming here. The only question is whether or not it would be a mistake to leave. If I knew that the situation would remain unchanged here, I’d be gone in a flash and never to come back.
Give me a break! “You have an combined income of over $ 450000/year you pay $4,780 per month in rent and you had to cut our lifestyle to the bare minimum. You share a single car between the two of you. You rarely go out to eat. All of your money goes to rent, childcare, and groceries” Let me work this out for you as maths is obviously your week point: You take home roughly $21000/month. That’s net! Less $5000 rent and it leaves you with $16000 to spend on groceries and children education. Sorry man but you and your family must eat a truckload of food each week! Lots of education happening there too! LOL
I quite agree though that housing is a disgrace in this country.
This doesnt make any sense I signed up just to comment how can 450k a year is whinging wtf? Be down to earth with 99% of the population or get out. I am 30 years old with 13 years work I never owned more then 40k s year and I still live very comfortable life and even made something of it on to my second freehold property now. With 450k s year thats equal to me working 20 years to have 2 average house payed off.
21000 a month is like winning the lotto every month how hell you burn it all?
The bogans have nothing else to life for….. simple like that. This is just a sad country.