Labor in office, what will happened to property investment?
- Thread starter DonkeyKong
- Start date
If rates close to 20% followed by a recession is what you truly believe will happen, Kenneth, start preparing for it now by selling and lowering your LVR to the point where you WOULD survive.
If your prediction is wrong, though, you lose out. Personally, I do expect a recession but I don't think we'll get back to 18% rates: even rates just past 10% would kill the economy because most people have so much bad debt and are so inept in managing their finances.
We each take our chances.
Alex
Doesn't anyone else see the contradictions here?
Property doubles every seven years, I'm investing for the long term and short term (3yrs?) downturns don't worry me and many other mantras have been posted here ad nauseam. What has changed?
I genuinely hope the weak hands do panic tomorrow: I have some dry powder. But it won't happen. The professionals will have already made any adjustments they think necessary.
Move along! Nothing to see here. LOL
Property doubles every seven years, I'm investing for the long term and short term (3yrs?) downturns don't worry me and many other mantras have been posted here ad nauseam. What has changed?
I genuinely hope the weak hands do panic tomorrow: I have some dry powder. But it won't happen. The professionals will have already made any adjustments they think necessary.
Move along! Nothing to see here. LOL
Wow...way too much over-analysis going on here....
HandyAndy says: We have just replaced a cow with a cow, they both give us milk. Is milk good or bad for you? The debate continues....
Think about it...
HandyAndy says: We have just replaced a cow with a cow, they both give us milk. Is milk good or bad for you? The debate continues....
Think about it...
Luckily for those of us who invest in residential property, most residential property (unlike shares) is NOT in the hands of professionals. The vast majority of residential property is owned by ordinary people and me-too investors. That spells opportunity for those who can keep their cool and manage their finances enough to take advantage of the opportunities. Isn't it every investors dream to buy in a recession when the market is tanking?
Property doubles every 7-10 years on average. At any point in time we will be below or above the long term trend. Returns will be better if you buy at a time when the market is below the long term trend. The longer the market has been below the long term trend, the better the time to buy.
Alex
I have to say - I agree 110% with everything said in Deep's post. The economic climate today is very much like that of the Keating era recession which people continue to blame on the Labor govt instead of the global events that caused it. I very much doubt that we will see the 18% interest rates of that era because, as everyone seems to forget or ignore, they are now set by the RBA, not the government, and monetary policy has evolved since then.
Now, as then, even a Liberal govt would not be able to prevent the recession we are bound to have in the not too distant future because it will be a global recession, not just us.
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Yep, business as usual again...but wait, most of the key players and business operators appear to have changed quite a lot over time now, isn't it? .... For example, where is the highly flamboyant Alan Bond now etc?
For the same old players, they have become more experienced and wiser investors/business operators today than before, as a result of the previous lessons learnt, isn't it?
The more successful investors who have managed to succeed through the high interest rate during 1989-1990 tumultous period, are much richer today. They can now afford to invest in the higher priced prime properties.
Cheers,
Kenneth KOH
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Dear Natmarie,
1. Out of personal curiosity, who does the RBA actually answer to, at this point in time?
2. ... To my own surprise, I have just read from Shane's research study article (Page 5) and learnt for the first time that the Australian PM "effectively controls the fiscal policy in Australia" (through the House of Representatives). ...and Not the Treasurer nor the Finance Minister nor the RBA. Do you agree?
3. When Australia last went into a recession in 1991, I believe that it went in alone singly by itself, without the rest of the world being similarly caught in the same recession, isn't it? The US under the Senior Bush's leadership, was busy then, with the leading of the multi-national coalition force to free up Kuwait from Saddam Hussein's Iraqi Forced Invasion, isn't it?
4. ... I do not quite recall we having a similar recession in Singapore during early 1990 periods.
Cheers,
Kenneth KOH
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I walked outside this morning and the sky hadn't fallen in. Everyone is very ernest and serious dare I say, for a Sunday morning.
Everyone is very ernest and serious dare I say, for a Sunday morning.We've discussed this to death so I am responding more for the benefit of others. I can't let these comments slip. Blind faith in the "property will always outperform" religion will get people into trouble.
If you are talking "all property on average" doubling every 7-10 years then even if it was true in the past then moving forward it is a nonsense idea. Take today's prices and double them and ask how can this be funded? Wages to double? I don't think so. Debt to double? Again I don't think so. Specific areas might double though - I accep that.
Back to Labor - in theory it shouldn't make any difference but it might in that it may give people a reason to lose confidence in property. The next few months will give an indicator I suppose.
Given that they were appointed by the Libs and they raised rates right before the election, I'd say they're NOT exactly feeling beholden to the Liberal Party.
Why is that such a surprise? The government is in charge of the budget, and therefore fiscal policy. The PM not being in charge of fiscal policy would suggest the PM and Treasurer are at odds, and that can't be a good thing.
You're kidding me, right? The S&L crisis in the US was in full swing around 1990.
Alex
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I didnt say that just because Labor is in power that everything will fall. I said the shock of labors (unexperienced economic managers) new win will cause market to fall sharply on first day trade. I know it has been falling around the world but the Australian market has also had several proportional drops last week. I just think the monday drop will show Australia how the educated shareholders feel about this new leadership.
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Another thing is that we all know that rates are rising and that the reserve makes this decision independant of the government. But I also know that there are a lot of niave ppl in this country who will blame Labor anyway. Just like they blamed Howard when they went up under him.
Another thing, Over night the leader of the greens said that they want to preserve the tourism industry in Tasmania. He mentioned that he wanted to see the end of the Pulp Mill. He said this on the night that the election was won. Not the day later but on the same day! And if I can recall correctly the only reason that Labor won in every single TAS seat is because they promised that they wouldnt destroy the pulp mill and the forrestry industry in Tasmania. Yet on the same night the leader of the greens said that they will be pushing to the ALP to stop forresting in TAS(Already a broken promise?). Already that is a big industry in Tasmania that looks to go and this will lead to less jobs in that state and hence eventually affect the price of property there. I know its a long shot but I dont see anything positive coming out of this election!
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Gillard as Industrial Relations manager? Like Hellooo Australia! You didnt vote for Rudd you voted for Labor..
Well said evand. I am dissapointed at the election result, but I agree that my success is not dependant on the government in power (In Australia at least).
I think in that respect we are fortunate that the two major parties have so many similarities in Aus... Imagine what a challenge it would be for us property investors if we had the Socialist Alliance for a federal government.
You believe what you want. I'll believe what I want. It's all opinion: I don't know what the future holds and neither do you. We both put our money where our mouths are (or in your case, you put no money where your mouth is) and we'll compare results in 10, 20 years. If I'm wrong, heck, I'm screwed. If I'm even sort of right (i.e. property goes up 5% a year instead of 7-10%), I'll be rich. If you're wrong, you work for the rest of your life. If you're right, you get bragging rights.
It'll be funded as it always has been: higher debt in dollar terms supported by higher $ wages. I think prices are very likely to fall or at least stagnate for a few years while wages catch up. Hence my comment about investing at below or above the long term growth trend. I'm looking for areas that have been performing BELOW the long term growth trend for a few years already, and so are already 'relatively' cheap. I don't plan on buying every property in Australia, just my own target areas. For example, I think if you buy a high-rise apartment in a CBD at 3% yield, you're going to have to wait a LONG time for 7-10% average growth. Since I aim for below-median, 3 bedroom old houses in areas with good transport, I think it's going to double every 7-10 years. This, of course, is all opinion, but heck at least I'm willing to give it a try. You don't agree? As if I care.
If this philosophy gets me in trouble, that's my problem. If people read my post and decide to act on it, that's THEIR problem. I'm certainly not taking legal responsibility for it. If you don't believe in that philosophy and don't buy property, that's your right too, and I'm STILL not taking legal responsibility for it.
We all take our chances. I just ask: over the long term, in a politically stable democracy like ours (assuming we don't get nuked), do I think it's better to own property, or not? My answer is that it is better to own property.
That's your problem. You only look at things in the short term.
Alex
I walked outside this morning and the sky hadn't fallen in.
Agreed Buzz...lighten up all, one politician is just like the other...in fact, I just heard Mr Rudd say..."I will be a leader for ALL Australians"....spank my hairy crutch MR Rudd, spank my hairy crutch.
we must remain positive. some upsides are:
- finally someone will do something about this absurd Japanese whaling situation
- hopefully they close down logging and the pulp mill in Tas
- Rudd's Mandarin connection may help bring us closer to China
- I look forward to cheaper petrol and groceries
- finally someone will do something about this absurd Japanese whaling situation
- hopefully they close down logging and the pulp mill in Tas
- Rudd's Mandarin connection may help bring us closer to China
- I look forward to cheaper petrol and groceries
On another note, I distinctly remember at the last election the AUD/USD index rose strongly as soon as it was clear the Libs would retain government.
This is generally because as Kenneth alluded to, foreign investors pour money into Australia when they like the govt and see it as a good economic manager (pushing our dollar up), and take their funds out when they opposite is true (pushing the dollar down).
Hence, come Monday when the markets open, I expect an immediate drop in the dollar of around 2 cents (Moving from approx 88c to approx 86c).
Any other currency traders on here?
This is generally because as Kenneth alluded to, foreign investors pour money into Australia when they like the govt and see it as a good economic manager (pushing our dollar up), and take their funds out when they opposite is true (pushing the dollar down).
Hence, come Monday when the markets open, I expect an immediate drop in the dollar of around 2 cents (Moving from approx 88c to approx 86c).
Any other currency traders on here?
OK so far.
Why contradict yourself in the next sentence?
The educated shareholders will have already made their adjustments. Seriously, Were you surprised by the results?
I hope the drop happens but I suspect I will be disappointed.Are we talking about the same naive ones who blamed Paul Keating, not Paul Volker, last time?
I know I will be able to adjust if necessary. If you can't you're doing something wrong. Don't blame anyone else.
Will you be shorting the A$? You must be the only currency trader caught out by this result. You may be right, but there is no point in being both right and dead.
Yes, shorted with a substantial amount (money I can afford to lose of course since even the best currency traders are only right 20% of the time).
