Houston.....We have a problem.....

You have to be living under a rock not to see the property market heating up. Haha guess I have been very wrong so far. Two stories to recount.

First, the whole family went to see an auction today in Cremorne. Price guidance/expectation was $1.65M+. Open bid was $1.8. It was eventually sold for $1.98M. 5 active bidders slugged it out. The house is quite old and probably need some work and is located on a main road. However, if you build a second floor, you can probably see the CBD from the second floor. Land is big for the area (over 700 sqm). The house next door was for sale last year and only "got" a vendor bid of $1.8M.

Second, a friend went to an auction in Chatswood last week. A few months ago, a similar house on the street was sold for $1.2M. The house last week was in far better condition. Open bid was $1.2M. Second bid was $1.4M. Third bid was $1.6M. Needless to say, it was over quickly.

It would not surprise me if prices are now higher than the peak in some cases. Thinking back what went "wrong"....Suspect the key supporting factor behind the LNS property market has been the lack of supply. Other factors have also contributed to the "happy" market. The first home buyer grant has allowed lots of property owners to trade up. The rapid recovery for the local investment banks does not hurt. Low interest rate definitely improves affordability for most folks. The list goes on and on and on....

What is our plan ? Looks like it is time for Plan B. We have given up on the LNS property dream. Supply so far is not picking up there. We are now looking further north. Sad to report but it is not getting any easier. Same story...Crowds everywhere. The good news is supply is picking up in the area but prices are comparable (if not higher) than even LNS if the houses are close to station and on the East side.

My strategy is simple. We have a set budget. We are only prepared to pay that price. If we like a place, we would just offer what we think the house is worth (subject to that upper limit) and see if it sticks. So far, no luck. I figure this is a compromise of sort. If successful, I suspect while we would be over paying relative to other alternative investment opportunities out there, at least we protect ourself from future financial distress. If not successful, suspect my next blog title would be "Houston....We have a BIG problem.....".

Turning to the stock market, tricky times. Looks like consensus is the world is on the mend. Just look at the strength of the AUD. Stocks have rallied globally. Seemingly, a lot of folks are so far refusing to believe and have not adjusted their asset allocation accordingly. While it is hard to believe, the proverbial "money on the sideline" may still apply. My scenario and my time horizon are very short term now. Maybe there will be a short term correction and then if all stars are aligned stocks may melt up towards the end of the year. I really don't have a clue what 2010 will look like.

In the meantime, if you are a distressed buyer like us, keep your fingers crossed and pray for more houses to come on the market. We really don't want to have to shift our property aspiration to include the Central Coast area....