Im getting a bad feeling in my stomach

That was top of mining boom when dollar was near parity.

 

I've been thinking the same thing.... hard to tell though....The best way to see the cliff is from below..

However I think its safe to say that Sydney has progressed from catchup to absolute madness.

I feel like the boat which will permit a soft landing is now leaving the dock....

But you know...It's "the vibe"....been wrong before.....

 

OK so what are we at the top of then?? Both the 87 crash and the GFC had 4-5 qtrs. of ~10% gain.. when you see that type of euphoria it's time to worry...

ps - the mining boom continued on way past the market peak in 2008.

 

A Hobart suburb came first and an Adelaide suburb came 2nd in the annual growth rates.

 

According to the charts we saw on Saturday we are just back to the long term trend for share price and share value.

 

Well.. I have been pretty quiet. Serviceability wall was hit. Takes the wind out of the sails.

 

((IF (MELBOURNE<BRISBANE),"TO THE MOON"), IF (MELBOURNE>BRISBANE), "JUST A BIT LONGER")

 

Buying and holding a good divvy stock now wouldnt be such a bad idea. Actually looking into a few S&P500 ETFs myself at the minute.

 

Not at the moment., unless you can't afford to buy more

Solution is simple and a quick reading of my used Netspresso pod revealed the following info , aka the PChat score

There are mixed messages , because different places are at different parts of the cycle .

The mass media still only talks about the " a property market " in australia , which in mass media speak is Sydney / Melbourne .

Guess what , each further increase these move ever closer to their peaks . When that occurs is only obvious after it has happened .

So while Sydney Melbourne are nearing their top , other parts of the country are starting to move ,

Sydney has already sent waves into regional NSW .

Brisbane / Adelaide / Hobart are the next cabs off the rank and significant moves there will then lead on to regional centers there moving .

It's called a property cycle .

You do need to be careful with regional's and make sure that their fundamentals are ok and that there's movement in the market in the right direction.

Cliff

 

Was that PT's course?

In any case, that's exactly my observation too.. it's pretty obvious when you look at the AORD trend from 1984ish to now. the trend is almost a straight line, with some abberrations around 1987 and 2008

 

Compounding growth would suggest an exponential curve!

 

Fixed that for you

 

Poor ol' Perth, the forgotten market

@Blacky, isn't gloom the time to be buying?

Be greedy when others are fearful and fearful when others are greedy.​

Too much stock market chatter for me. I will avoid until people are gloomy

 

Heck. I can't count that high. On a good day I reach 11. 12 if I use my nose.

 

At least the Blackwells can count that high without resorting to other appendages.

 

so much of those quotes... does he even exist?

 

And how many times it has hit 5800 since then? Shows that push is just not there. This market run has got nothing backing it up. Its just low interest rates in Aus and everywhere else in the world.

I will buy at 5000...

 

Something to consider is if you've got this feeling, others probably have it too.

I'm noticing an awful lot of negative sentiment. Five years ago if you said the word bubble (cough Steve Keen cough cough) you were a conspiracy nutter. By a year or two ago, if you said the word bubble you were still met with some disbelief. Now, people seem to almost universally accept there's a bubble, and the rationalisations are instead focussed on whether it will burst, often suggesting there will be a soft landing. Ah yes, I remember the "soft landing"...

The thing is, there are two kinds of demand in housing markets. One comes from fundamentals (the things that make people buy housing to live in) and the other from investor sentiment. Bubbles happen when these two things de-couple, often to crazy heights, but the trouble is fundamentals will always reassert themselves. They're like an upper limit. Eventually, people won't earn enough money to pay more. People won't need as many houses as have been (over) built. People won't be able to borrow enough. Rates will rise, making loans more expensive.

It's basic mathematics. Income growth is at a record low. Sydney currently has a median multiple of 12.2, but if we pretend it's 10, and if we pretend the median household income is 100k (it's actually around 90k)... let's also pretend incomes are growing at 5% per year (unlikely to happen anywhere in the foreseeable future) and also acknowledge that in order to not be in a bubble, the median multiple needs to be 2-3 (we'll be generous though and say 5, which would be higher than almost every city in the OECD). If all of those things were true - a more favourable situation than we have now - even then it would take 15 years of no house price growth whatsoever for incomes and prices to realign. That is how far we are from fundamentals.

If house prices keep growing, fundamentals will be left further behind. And the trouble is, markets like Sydney have now become so tight there is no longer any scope for just about any variable to change. Rate rise? At least some people are going to find themselves unable to pay, making oversupply worse. Continued building? Adds to a supply that now exceeds our (rapidly) falling population growth. Continued price growth? Debts and incomes will be left further behind.

Bubbles burst because of this problem. You always hit the wall of some fundamental or other, or even many. Then sentiment becomes vulnerable. When sentiment is the dominant market force, people are buying (and often financially relying) on the expectation of capital growth alone - often citing recent growth as evidence it will continue. Positive sentiment is an incredible thing, but negative sentiment - if it gets going - can cause its own powerful snowball effect.

What happens when our unusually high number of inexperienced investors (many of them near retirees and many with profiles entirely dependent on continued capital gains) stop making profits? What happens when investors who've bought indiscriminately, expensively, at the top of the market, and often entirely without a plan see even the slightest correction?

I said 15 years above would give the market a shot at recoupling - but would our inexperienced investors hold for even one year? Two? What if they've bought an off-the-plan apartment and settle at a loss? What if they've bought in a fringe suburb and they're competing with aggressive developer discounting? Perth and Darwin are good examples of how quickly this can happen - and how little a drop is needed to stall entire markets.

I said in another thread that if you can't look at fundamentals for growth (like the rate of population growth, income growth, physical housing supply, rates, rental demand - and to a lesser but nonetheless significant extent your competition from like residences - taking in factors like access to good schools, commute times, renovation potential, proximity to services, income security and popularity of the suburb and so on i.e. the things you will have on your side if your home is competing with an oversupply of similar homes on offer) then you are placing your future solely in the hands of that tsunami of speculative 'FOMO' bandwagon-jumpers. And that group is fickle. And impatient. And often leveraged to the eyeballs. They didn't know when to buy in, and they sure as hell don't know how to hold on.

There's a theory called the 'greater fool theory' and it basically fits with the idea of why asset bubbles always pop. A boom becomes a bubble when strong fundamentals grow the market, but then that strength is overtaken by sentiment - which continues even after fundamentals drop off. Investors flood into a market and buy because prices are rising, which causes prices to rise, and so more buy in and so on. The original story of the greater fool theory is that an investor overheard two bellboys bragging about how they'd just bought stocks and were going to get rich, so he immediately went and sold his own stake - because the fact the very inexperienced were buying told him the price was only rising because of a series of 'greater fools' bidding the price up. Soon the greatest fool would buy, and there would be no one left to sell to.

I don't know if we're approaching this greater fool moment... but a good investor has a strong idea of where continued momentum is going to come from. In bubbles, prices are driven down by the noobs - those inexperienced investors bought in panic and are at risk of selling in panic. Be very, very wary of that investor. It has company.

I feel now is the time to plan carefully. It is batty to think a correction, minor or major, isn't a real possibility. When that sort of correction happens, sentiment may or may not suffer but if it does, in some cities like Sydney the gulf between sentiment and fundamentals is unusually large. These cities have been targeted by such rapid, widespread investment - and much of that investment has high debts attached. You've also got a lot of recent development, and those developers are starting to discount, offering everything from price drops to free BMWs. If (when) rates rise, at least some of these buyers will sell at a loss - and negative sentiment can act like a contagion. A 0.5% rate rise on a $1m median may, for many, be a stretch too far.

Bubbles aren't a reason to panic, but a good investor understands the psychology that drives them. Avoid assets that are in oversupply (apartments and fringe suburbia). Even if a bubble bursts, quality family homes on good areas will remain in demand - for me, these are safe harbour assets. The worst correction will barely shake them. Even in Ireland, which lost 50% on values, most of the losses were concentrated in heavily developed areas - good family homes took a dip but attracted strong rental growth, then prices recovered very quickly. Prices in fringe suburbs and apartments often didn't recover at all.

Bubbles also present a golden opportunity. If you think we're approaching the top, remember the exits in a crowded room are small. Don't panic by any means, but have a plan. If you want to sell, know your exit route and take it if you think fundamentals no longer realistically support any growth. Reposition in other, less bubbly markets (like Brisbane woo! or Adelaide, Hobart etc). Buy in good middle-income suburbs where people will likely hold on. Buy where the suburb isn't crowded with investors and developers at risk of selling up in a pinch. Do not think about growth you might miss out on (timing the market is impossible) - think about fundamentals. Think about diversification. Think about value-adding. Think about your safe harbour. Above all, remember if there is a correction, there's going to be a recovery. Use that recovery to buy.

Finally, if you think markets like Sydney will grow out of your reach if you get out, think about what this means. What is really means. Are you really suggesting that market will somehow - despite worsening lending conditions, no income growth, oversupply and low population demand - become the province only of the very rich? Because that isn't how economics works. Supply and demand do not like being out of sync. If the median buyer is priced out of the market, where is growth going to come from? Investors? Who are they then going to sell to?

After this very long post, I just want you to take a moment to consider this quote from the Irish Times in late 2006 (by which time the market had in fact peaked).

One can only surmise what the average millionaire will be able to buy in Dublin in another nine years. A pokey one-bed apartment in the outer suburbs? Or maybe a townhouse on a new development bought under the local authority's affordable housing scheme? Will the semi-d become the preserve of the multimillionaire while only the super rich will afford the luxury of living detached?

 

Have been having some fun using topups for funds/LICs/shares. Steady ~10%/yr return after tax, not as good as Sydney property has been over the last few years, but small price to pay for having some liquid assets to balance out the brick'n'mortar stuff!

Was wondering if I have a role for you but you might be frightened away by the amount of unjustified nvarchar usage Seriously though, if you have time to come to Chatswood for a coffee, send me a message.

 

Chatswood is great... 16 minute train trip from home and my sister lives in Chatswood... sure.