How to keep your avocado habit — and still buy a house
Avocado on toast: mainstay of the modern breakfast table, darling of millennials worldwide. The same millennials for whom home ownership has become out of reach, with house prices sky-high across global centres.
According to Australian property developer, Tim Gurner, it’s millennials’ consumption of smashed avocado that is impeding their path to homeownership — making it the dish that ties a generation to their parents’ spare bedroom.
But is Gurner right? Or can Gen Y have their toast, eat it, and still buy a home? To find out, we flexed our calculators and did the maths.
Take Sam, a classic millennial: Works in the creative industries, navigates her home city of Manchester on a fixie, and indulges in avocado brunches twice a week costing her £48 per month.
Sam has a first home purchase in mind, and has managed to scrape together £10,000 in savings. The home she’s looking to buy costs £204,950 (the UK’s average for a first time buyer). Currently she’s able to save £250 each month and puts her money in a Cash ISA with her bank.
To buy a home Sam needs about 20% up front for her deposit and costs. This is about £38,000 now, but if house prices keep growing, it’ll be significantly more in the future. In fact, it’ll take her about 13 years to hit her target, based on her current situation.
Let’s look at Sam’s options:
Option 1: The Tim Gurner
Following Tim’s advice, Sam goes cold turkey on her AoT, and puts the proceeds towards saving for a home. If Sam were to cut out her avos entirely she could save an extra £48 each month (or £576 each year) — meaning she could buy her first home two years sooner than if she carried on as normal. However her weekends would become joyless and worryingly low in monounsaturated fat.
Option 2: The Avo Your Toast and Eat it
Say Sam wants to keep her habit, AND save for a first home. “Impossible” carps Tim Gurner — we think otherwise. Instead of depositing her savings in a bank account, Sam could make her money work harder, by investing with Bricklane.com.
As the UK’s first Property ISA, an investment with Bricklane.com tracks property values and earns income from rent. Just by investing her money, rather than leaving it in a bank, Sam could have her avo and eat it, even while saving for a house. That same £250 per month savings would mean Sam reaches her deposit in 10 years — three years sooner than normal, and a full year sooner than the Tim Gurner.
That’s a significant saving in time, just by being a little smarter with her money.
Bonus — Option 3: The Full Millennial
Like all self-respecting millennials, Sam values experiences over possessions, and is willing to buy a home in the same timeframe as the status quo if it allows her to increase her smashed avocado consumption to previously unheard of levels.
With Bricklane.com, she could double her intake — that’s 4 servings per week — while still reaching her target deposit amount in the same time as she’s currently heading for (13 years). Better still, she could invite a friend to her twice weekly brunch trip and pick up the tab for them both, all by investing her money rather than leaving it in the bank.
Pretty good payback for something that takes less time to setup than eating a hearty helping of the green stuff; and a tastier way to afford your first home than following the advice of an Australian millionaire.
Learn how Bricklane.com could help you get on the housing ladder sooner:
As with all investing, your capital is at risk.
How we calculate this
Projections are never a perfect predictor of future performance, and unlike with a Cash ISA, your capital is at risk. The projection includes the effect of fees and assumes income is reinvested.
House price growth assumed at 3% per year, with Bricklane.com returns calculated by reference to current rental yields on offer (3.4% as at 05/06/17). Assumes all investments are held in an ISA.
Cash ISA returns are determined by reference to data from Bank of England cash interest rate data, and current premium of ISA rates. Rates beyond ten years are assumed to equal the ten year rate.
