Sunday 31 October 2010

Net Worth Update: October 2010

The stock market ended the month with a modest gain after being up strongly in the first weeks of October. Despite many pundits proclaiming the Australian real estate market is now a bubble, prices continue to hold up overall, and our property valuations rose strongly, more than regaining the slight drop in average sales price the previous month. Although real estate prices are definitely high, and appear to be at unsustainable levels compared to average income, the continue strength in sales prices and the shortfall between new home construction and population growth rates makes me doubt we are in a "bubble". There is little sense that investors are piling into Australian property in the hopes of large capital gains - it seems more likely that the lack of supply is causing prices to be bid up, and that "average income" buyers are dropping out of the market. It would be interesting to know how the average income of people taking out mortgages has changed over the past decade as prices doubled. I expect the income of new mortgagees has risen much faster than the average wage. In other words, as prices have risen faster than wages, the percentage of home owners in the Australian population has been dropping and therefore today's home purchasers come from a more affluent cohort than in the past.

Our retirement account (self-managed superannuation fund, SMSF) showed good growth during the past month - investment gains were boosted by two month's worth of employer contributions being processed during October. This was somewhat offset by the payment of quarterly provision tax to the ATO in late October.

Assets___________$ Amount______$ Diff_____% Diff 
Stocks_*__________$23,977______$3,694______n/a % 
Retirement_______$348,829______$8,728_____2.57 % 
Properties_______$937,942_____$33,555_____3.71 % 

Debts____________$ Amount_____$ Diff_____% Diff 
Home Mortgage(s)_$363,522_______-$434____-0.12 % 

Net Worth________$947,226_____$46,431_____5.15 %

* the Stocks figure is portfolio value - margin loans. As my portfolio value (and margin loan debt) is around $500,000 relatively small movements in the stock market produce huge percentage swings in the net value of my stock portfolio each month.

Net Worth is tracked in AUD terms, so the recent strength in the Aussie dollar would show our current NW in USD terms is close to our all time high, rather than still being some 30% off our previous AUD peak in 2007.

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