Getting left behind

Another dinner party on the weekend, and so another chance to make some observations about people's beliefs about the Australian property market.

One guy made the (somewhat typical) following comments:

• If you don't buy now, you're going to get left behind.
• If not now, then when?  Prices are only going to go up.

I didn't pay too much attention to this guy, after all he also bung on about earning 6% a month on his "renting out shares to the US market" investment strategy.  For the record, 6% a month is doubling your money every year, or multiplying it by 1,000 every 10 years.  That's right, if it all goes according to his plan, he'll be able to convert $100,000 to $100M in 10 years, and $100B in 20 years.  Good luck with that.

Getting back to property, it got me thinking about "getting left behind".  I understand where the thought comes from - after all, as a result of the current property bubble, there are many people that used to be able to afford a decent place to live, and no longer can - myself included.  Unfortunately, as a result of this, a lot of people simply rush in to avoid getting left behind, rather than wait until prices become affordable again.

From a personal perspective, the thought of "getting left behind" makes no sense whatsoever to me.  I have 2 choices: rent or buy.  I'm currently renting.  I also have enough savings and investments that the interest/dividends alone pay the rent and allow for a moderate lifestyle.  I could retire, but choose not to, just yet.

However, if I were to buy a house, then I would need to work for another 15 years to be able to pay it off, and that's to live in exactly the same house that I'm now renting!  Which would you choose?  Retire today or work another 15 years, for the same outcome?

It has never occurred to this guy that house prices might fall, and that people might end up in negative equity, having to work bloody hard for a bloody long time, just to get back to having zero equity.  He obviously isn't watching the US too closely.

I think that one the reasons that the Australian property bubble has gone on for so long (government interventions aside) is that the average Australian has such a strong desire to own his own home, and such a strong and ingrained belief in the strength and longevity of the property market, that it's just so hard to shake, despite the mounting evidence that the downturn has already arrived.

I only see this guy once a year.  I mildly look forward to catching up with him next year.  I wonder how far left behind I'll be...