Fellow Millenial Shocked There Are These Things Called Trade-Offs

Elizabeth Davies at Interest.co.nz fails to get me to care with this emotive claptrap about how millenials have it so hard because we can’t enter into highly leveraged housing service arrangements.

People are being forced to choose between their job in the city or their house in wherever they can afford. They are being asked to choose if they want to buy a house now or have kids. It’s no surprise that women are choosing to have their first child later and later as families desperately scramble to achieve that elusive state of ‘financial security’.

The possibility of never being able to afford to buy my own home is an incredibly bitter pill to swallow. Made even harder by the fact that I was, like many people my age, brought up thinking differently.

This sort of emoting is a prime example of the lack of clear thinking I encounter regularly amongst people my age (24). It’s shock at life not working out the way they hoped and dreamed it would. Newsflash: life has never been fair and never will be. It is also far more competitive than it was in our parent’s / grandparent’s era because of the nature of global skill markets and relatively easy access to foreign labour markets if you have a strong education or valuable skills.

It’s even more disappointing because she’s written posts before about how there is a trade-off between cheaper rent and transport costs. Garth Turner at Greater Fool talks about “house horniness” – the rabid desire for house purchases that most young couples have well before they have the savings necessary to justify a first home. If everyone is doing it, it’s probably not the smartest idea or the “safest”. Nesting desires be damned, there’s this thing called reality that even millenials have to live in.

Here are some things to be grateful for as a New Zealand millenial:

  1. Our education was primarily bankrolled by the taxpayer. Student loans and student allowances for those who qualified reduced the number of hours needed to work part-time in order to support you through university. What’s even cooler is that income based repayments through using “SL” as part of your tax code mean that you can repay your student loan progressively as your income rises over time. Then, when you’ve repaid it, you can change your tax code and get an extra chunk of money each pay day for saving or consumption. This is lightyears ahead of what students in the US face.
  2. The cost of rent is not as high as the cost of servicing a mortgage. For young people just starting out, if you’re splitting fixed costs with a partner (as Elizabeth is), housing affordability is a lot different than if you’re by yourself and flatting / trying to pay for an apartment on your own. Relative to incomes, considering that most millenials won’t be having children for a few years, your ability to purchase housing services isn’t impaired. Relax, buying too much house is an easy route to financial misery.

Just some quick thoughts. I’m not seeing the issue here – if you can’t afford something then don’t buy it. House prices are outside of your locus of control. Your time is far better spent building your skills, working harder to get a pay rise or new job opportunity or starting a side gig that supplements your main source of income. Moaning about your ability to purchase housing services when you already have a roof over your head is a bit rich.

Take some time to think about global inequality. Millions of people around the world don’t have electricity, running water, food security, yet you’re moaning because you can’t get into an asset class that has a lower marginal tax rate than other asset classes and could see you earn a substantial capital gain through no exertion on your part or reference to your labour market value? #FirstWorldProblem!

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