When I started my investing journey I kept coming across the idea that success is tied to your ability to resist the emotional side of investing. At the time I didn’t quite understand what that would look like, I would picture the stock market crashing, your investment portfolio dropping from $1 million to $600k, and people panic selling. As it turns out, I think the ‘emotional’ side of investing is less about the change of the numbers in your account, and more to do with the psychology behind your decisions, it’s not as illogical and black and white as I once thought!
The Australian Rental Crisis
Currently I rent an apartment in an Australian city. For anyone who’s unaware of the Australian housing crisis, Australia currently has far too little residences for everyone in Australia, even though we have some of the biggest landmass in the world! This, in turn, has caused the price of existing properties and rents to grow, vastly outpacing wages and inflation. For example, my rent was raised 35% in one single year! In turn, it has also led to the experience of renters being mistreated as they have next to no bargaining power against the real estate agents, making the prices exorbitantly high and increasing stress due to instability (any issues and you can easily become homeless).
Due to this crisis, I have started having thoughts to sell down my portfolio of shares in order to buy an apartment of my own to avoid the negatives of renting. When I do the math, it just doesn’t seem worth it from a financial standpoint. Units are around the $400-500K price point for a 1 bedroom apartment. Take into account interest repayments, body corporate fees, council fees, etc, I would be in a worse financial situation by buying my own apartment, but sometimes the feeling of security I would receive seems incredibly tempting.
If, by chance, I would have to find another apartment to rent, I would have to attend inspections consisting of ~50-100 couples and engage in ‘rental bidding’, a form of increasing rent voluntarily to beat other applicants. The added stress of this hypothetical leads me to occasionally browse websites for currently selling apartments in the area, a thought that is illogical in terms of finances, but logical in terms of emotional, or feeling.
Jump in before it’s Too Late
Recently I was told a story regarding someone knowing a principal who managed to get accommodation paid during the tenure of his position, but once he was retiring, and had to return to purchasing a property in the city, realised he had missed the train in terms of property prices and had to return to work until the age of 67 just to be financially stable. This is a story of someone picking the right life options, study hard, go to university, get promoted to a top tier, and yet, still made one mistake that cost him years of extra work and financial distress.
The concept of hopping in the property market at the right time is one I’ve encountered numerous times, but until I heard this story, I didn’t really conceptually understand the significance of missing the opportunistic times had, as a whole, on your life outcome. It makes me question whether property can sustain this exceptional, unhindered growth into the future. My logic says no, yet looking at the Australia housing market over time, it’s managed to keep up with the stock market. This makes me question, if I don’t jump on it early, do I run the risk of financial hardship later due to not timing the market correctly?
Future of Housing
Currently, I’m still in a logical enough headspace to understand that there isn’t really a point buying an apartment that I would only use for the next ~5 years and outgrow. I just need to take the negatives of renting on the chin, and continue with my investment journey. That being said, I’ll need to eventually look at where to buy a property in order to raise a family, a concept that seems much harder as the times go on, and property prices seems to explode, limiting my prospects at numerous areas.
I’m trying to take more of a Stoic approach to the situation, and realise that I can’t theorise over the future, especially when I don’t have all the variables. I’ll have to tackle that problem, when eventually it arises, rather than suffer through battling it hypothetically numerous times.
My Plan
I will continue putting money into my ETFs to grow at market rate, investing over the long term, and within the next ~5 years, assembling a deposit for a property. As that goal approaches, I’ll have a better understanding of what areas I’d like to live and the costs associated. As it gets closer, I’ll adjust how much I’ll need for a deposit and compare my portfolio growth vs. interest, and see if it’s beneficial for me to sell down my portfolio for a reduced loan or not.
Time will tell if I’m making a mistake!
