I was just chatting in this WhatsApp group chat that's focussed on trading - usually equities and I brought up a question for discussion that's been boggling my mind for a while.
Is the real estate market over-extended? If not the US, is the Australian market overpriced? To analyse this in a meaningful manner, I just came up with the 10-30-60% Method™️.
This method will help you get your wildest ideas out there without much scrutiny - at least, it will shield you from it as much as possible. For example, here is my analysis on the real estate market with the Australian market in focus but it is my general thought on the worldwide market, as I believe there's correlation between the countries.
- 10% possibility - I'm unsure what catalyst would be but the real estate market goes into a volatile, selling frenzy and real estate is not seen as a safe asset anymore. This flushes out all the weak investors so after a 30-50% correction worldwide, the market starts going up again slowly.
- 30% possibility - there is no bubble. The market keeps on going up and up. The majority of the next generation is unable to afford a house and renting apartments become the norm. Not a good scenario if you ask me because of the massive increase in wealth gap that's implied.
- 60% possibility - the growth slows and the worldwide real estate market goes into stagnation for the next 10+ years, reminiscent of Japan's Lost Decade or Lost 20 Years. Some capital moves out from real estate and is placed in a different, more exciting market.
I believe this is a good method to clarify my thoughts as well and it helps me not fall into the trap of being, or being seen definitive on some outcome - because at the end of the day, every outcome is a probability.