My fuzzy logic is leading me to tie the stock market to the Sydney property market. By now, we have seen that stocks have bounced a lot from the low. If you are truly good or lucky, you would have at least doubled or tripled your money. Before we get too excited and put new money to work, it is worthwhile to step back and cool down a bit. As far as I can tell, most results are only suggesting that the environment is stabilizing. Most companies are not seeing any sharp snap back in orders. The stocks are running because analysts are typically using say EPS in 2010/2011 and then arrive at their price targets by using terminal PE of 12-15X.
Hello ? I can't even forecast my household budget of 2 adults and 2 kids 3 months out. Analysts are trying to forecast the macro + companies earnings' 2 years out. Throw in a banking system that was going to disappear a month ago, and you want to buy stocks based on their forecasts ?The only good news is, anecdotally, lots of funds have missed the current rally. Maybe it can go on longer than anyone thinks possible. Do be careful out there. Don't be too greedy on the way up.
Turning back to the Sydney property market....I notice that the market is thawing a bit. My better half was talking to an agent last week and he was telling her that the buyer/seller balance is now a bit more even than late last year. In the LNS area, a few houses in the high $1 - low $2M range were sold. These houses probably fetched $1-200K lower than "peak" prices one feels.
Let's see. The stock market is saying that 2010 should be better. Mortgage rates are low. I still have a job. Prices have come down a bit. Should I take the plunge now ? I guess this is a question a lot of folks ask themselves these days. From my perspective, there are two considerations:
a) There is no secret that there are limited number of new houses coming onto the market. As a matter of fact, we haven't seen a house this year that meets our needs.
b) I really don't think a 10-15% price fall is enough to compensate for the risks. For a start, we know that the Australian economy is seemingly lagging the rest of the world by 6 months or so. Furthermore, I struggle to see why house priecs would rocket up over the next 3-4 years. Imagine how much your dream home would cost today ? And assume house prices appreciate by 5-10% a year for the next 4-5 years, just take a step back and think about how many people in Australia can afford to pay you enough to get you to sell your dream home ? When I mentally run this exercise, I discover that there is no way I can afford my "appreciated" dream home ever. Even if I work till I am 130, the mortgage would remain very substantial. For the FHOG warriors out there, imagine if a 30 year old 2 bedroom flat costs $700000 in Sydney.
In my situation, I haven't found our dream home so I really can't be bothered. I also figure that over the next 5 years or so Sydney house prices probably won't go crazy. So why the rush ? If I were a rational person, I would gladly miss the Australian home ownership train for the time being.
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