I have friends in the stock market who confidently give advice on the real estate market. They are real experts in the stock market and that gives them the extreme confidence to make predictions about the property market. Most of the times, they have been proven to be wrong. That is because of the fundamental difference in these two asset classes.
- Stock market is totally organised and transparent. All transactions are routed through a central exchange and are visible to all parties. Just imagine if there was a need to list all properties on a single exchange and all transactions had to be compulsorily routed through this exchange. The property market would undergo a drastic transformation with this one single change.
- Stocks are pure investments. Real estate is consumption plus investment. Hence there are a lot of emotions involved in the real estate market. A person who is comfortable in Bandra (West) will not move to Bandra (East) even if there is a chance of higher appreciation in Bandra (East).
- In real estate many times the supply is limited in certain micro markets. Hence the general rules might not apply in certain areas. To some extent, this also applies to the stock market. However, in stock market majority owners would be willing to sell at a certain price. This might not hold true in the real estate market.
- Stock markets are ruled by fundamentals and technicals. In the real estate market, there is no place for technical charts.
- I once heard Osho saying that unless you know God, you should not talk about him; you will ruin people’s lives. The same applies to stock market pundits who confidently advice people about real estate!
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