Labor in office, what will happened to property investment?

[Kennethkohsg]

I know this is a property forum but I will be watching the markets at 10.00am monday with much anticipation. I predict big falls due to the uncertainty.

**************
Dear TigerGT,

1. Let us monitor and see what will actually happens on the ASX, come this Monday morning.

2. Honestly speaking, I personally do not expect a sudden drop in the ASX on Monday, at this point in time, all things being equal.

3. This is because the majority of the Australians have voted for Kevin Rudd and his ALP and with most of the Australian mass media singing the same tune, even though the actual vote swing during this Federal Elections, in favour of ALP is less than 7%... unless something exceptional happens that cause the ASX to drop down suddenly on Monday as many stock investors are having the same concerns and discomforts as ourselves, regarding this un-timely change in the Australian Government and its leadership under Kevin Rudd.

4. Having said that, it would be more accurate and reliable to monitor how the ASX and the various housing markets in Australia actually responds over a longer period of time, say 3-6 months period after the Federal Elections and once Kevin Rudd and his new ALP government has properly settled in, to officially govern Australia as the ruling party.

5. However, I find that the sharp 16% quarterly drop in the business confidence among the small businesses in Australia, in response to this Federal Election, to be a significant indicator that the smaller businesses do not have the initial positive confidence regarding the change in government or/and as well as in Kevin Rudd and his ALP Government, at this point in time.

6. However, I do not know what to further expect from the smaller businesses nor how they would openly respond further once Kevin Rudd and his ALP has properly settled in and officially begin their business of governing Australia at both the Federal and local States Level.

7. For your further comments and discussion, please.

8. Thank you.

Cheers,
Kenneth KOH

 

[WinstonWolfe]

Will and Wylie, my heart sank when I heard this AM that Costello was pulling the pin. Costello as PM and Turnbull as Treasurer may have delivered Australia what it so desperately needs. Those two guys know how the private sector works.

Rudd, Guillard, and Garrett know squat about the flow of capital.

However, last night when at a blue ribbon do in Ascot, I could not help but lament the state of the Coalition.

- Howard should have gone in the middle of last year to pass the batten to Costello to take on someone from a contemporary generation.

- the Coalition politic were stuck in the past when they went with Howard last year.

- when I heard about Greg Chijoff's exploits, I realized the libertarian side of politics in Oz has been dumbed down profoundly......I can only hope that enough informed heads realize the same as i do, and appreciate the importance of joining the Coalition....

 

[Kennethkohsg]

I respect people's right to different views on politics, but claiming stock markets and property markets will fall simply because of this change in government are somewhat misguided -

it's like claiming that interest rates will go up more now that Labor is in power (they almost certainly will, but it won't be because Labor is in power).

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Dear Deepmarine,

1. How then do you explain the research findings by Hamish et al that the overall median inflation rate under the ALP Government in Australia averages 6.06% and is normally followed by a corresponding higher interest rate whereas it only averages about 3.05% under the Liberal Coalition Government?

2.With no apologies made, and at this point in time, I sincerely believe that the inflation rate and its corresponding interest rate in Australia is most likely to further increase over the next 6-18 months period under the new ALP Government as led by Kevin Rudd, as its has always been the typical pattern observed of an ALP Government in th past, as far as the present longtitudinal studies has shown.

3. I am personally curious to know myself, at this point in time, the actual real reaons why this has to be consistently so, as in the past ALP Government that has been observed by the researchers.

4. We can always re-visit this topic again in 9-12 months time and review its actual outcome then, in due course.

5. Let me say this in advance first, I sincerely hope and wish that my own pessimistic assessment is proven wrong in due course then, for the sake of those have already invested in the Australian residential real estate then.


Cheers,
Kenneth KOH

 

[Kennethkohsg]

Why do some property investors and many in this thread only focus on the immediate timeframe, ... surely when you bought it was for the long term. We won't always have good times, ..... you enjoy the good periods and ride out the lows.

Martin

*********************
Dear Martin,

1. While "Buy and Never Sell" is highly popular among many forumites who are presently investing in the Australian residential real estate, however, I have also learnt from my own present limited real life property investing experiences that it is safer and more prudent for me, to adopt this "Buy-Hold-Sell at Market Peak" where neccessary.

2. "Buy-Hold- and Never Sell" works well for those who can afford to patiently wait, to create wealth exponentially by compounding its growth over TIME.

3. For those who have successfully created wealth for themselves using this investing strategy, so far, I offer you, my sincere congratulations.

4. For those who have not or not yet, I will enoucrage you to please think twice and review your own investing strategy where neccessary. "Buy-Hold-and Never Sell" sounds good in theory but may not actually works for some investors at all.

5. It can be a "riskier" investing strategy when as long term investors, we are unable to patiently wait or/and safely hold on to our ever expanding property portfolio at all stages/times over a long period of time.

6. Some of the experienced investors have personally shared with me how they eventually lost the entire property portfolio, using this "Buy-Hold-Never Sell" Investing strategy during the 1989-1990 period where the prevailing high interest rate was as high as 18% and unfortunately, it was to be further followed by the last "Recession that Australia needs to have" in 1991 under the former ALP PM, Paul Keating's time.

7. Provided you can successfully ride out all the "low" periods during each and every successive property cycle and safely hold onto your ever expanding property portfolio, such an investing strategy can be highly risky over time as some of the unfortunate investors who have lost their entire property portfolio, will personally share/tell you their own painful experiences.

8. For your further comments and discussion where neccessary, please.

9. Thank you.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Yeah, yeah ... labour is in ... the sky is falling.
Me thinks too many people actually believe Johnny's rhetoric.

**************
Dear Patosan,

1. Please feel free to think and respond differently from what I am thinking/feeling after the latest Federal Election outcome.

2. We can always agree to disagree amicably where neccessary, please.

3. Whether Johnny's rhetoric was said or not said, it does not truely matter to me at all.

4. This is my personal belief and my own tentative assessment regarding my own (limited) confidence level, in the new incoming ALP Government in Australia to be led by Kevin Rudd, at this point in time, as a foreign investor investing in the Australian residential real estate.

Cheers,
Kenneth KOH

 

[kaf]

A mushroom cloud is quick and terminal.
The sub prime fallout might be slow and tortuous.......
Two totally different breed of cattle....

Mate, you are a worry...

 

[Kennethkohsg]

Kenneth,

Back in the late eighties, early nineties, I cut my teeth in the electrical contracting game in Melbourne.

I used to work for a lot of Chinese and Jewish developers on what you would call the higher end of the market property. The high interest rates certainly weren't stopping them then, so what will be the difference now?

These guys were making bucketloads (and so was I). It did of course come to a halt...but not as screamingly as was predicted.

Ciao

Nor

**************
Dear Nor,

1. Simply because I am not "you" nor one of those Chinese or Jewish developers whom you were referrring to.

2. It would be interesting for you to further share with us though, what you have learnt or/and deemed to be those the critical success factors that have made these Chinese or Jewish developers rich and successful while many other developers have failed along the way, at the same time.

3. Thank you.


Cheers,
Kenneth KOH

 

[Kennethkohsg]

From what I understand economic stability is only perceived as that in hindsight, but I have to say compared to the economic wobbles in the last 30-40 years we have much better experienced markets and regulators (as they've seen quite a few crashes now) which makes me think that future economic performance is going to be more stable.

kaf

********************
Dear Kaf,

1. For each market crashes that the market regulator has learnt his/her lessons to learn to properly regulate and try to stabilise the financial markets, the market will quickly develop its own new products and create new scenarios/events to trigger off its future market crashes.

2. That's the nature of Man and the nature of our fast-evolving financial markets today.

3. In similar line as yours, the only constant factor about the future is "CHANGE" + new uncertainities evolving out again.

4. Unless you have mavericks like Ian Macfarlance with deep market insights and a sharp mind and adept skills and experiences in managing the highly open Australian Economy effectively midst the ever changing global financial situations and one who is able to manage the new market crashes through his own intuition or/and sharp instincts before it actually happens, I doubt that the future economic performance for Australia is going to be as smooth sailing and stable as under Ian MacFarlance's time as the RBA Chairman.

Cheers,
Kenneth KOH

 

[Kennethkohsg]

Costello as PM and Turnbull as Treasurer may have delivered Australia what it so desperately needs. Those two guys know how the private sector works.

******************
Dear Winstonwolfe,

1. What for? and Who cares!

2. The other Australians and the mass media may not agree with you and will simply vote them out again , "simply because we don't like Costello or Turnbull."

cheers,
Kenneth KOH

 

[Norwester]

Kenneth,

Mate you're quite on fire today.......

Get back to you a little later - have to go and get Mrs Nor from the airport at Para.......

ciao

Nor

 

[Sunfish]

Kenneth,

Mate you're quite on fire today.......

Yes, writing too much and reading too little. A boring combination.

 

[yieldmatters]

It controls official interest rates, but market participants can and sometimes do ignore its cues.

Maybe a better way to say it is that the spread between the overnight cash rate (the one the RBA sets) and other interest rates (e.g. homeloan rates) is market driven.

If the spread is 2% and the cash rate goes up by 0.25% then the homeloan rate must also go up by 0.25% to keep the spread constant. That is why people think the RBA sets homeloan rates - they don't really but it appears that way.

What is happening now is the spread is increasing. Once the market finds the correct new spread then things will fall back to normal and the RBA will appear to control homeloan rates again.

 

[TheAnalyst]

Donot get too serious Kenneth.

My reason for dumping Howard is hismself: too old, dishonest, self-ego.. People are just sick (I voted Lib) of him in the position for 11.5 years and want to see something new. As I say in other post: Costtelo would never become PM because he has no balls to stand up to apply for the job. He has only himself to blame. Labor will do well just as Liberals. Such as WA, we used to say Labour always ran a deficit, but now .... suplus every year...

Costtelo gone now I am not sure when Lib comes to power again. Maybe another 11.5 years...

 

[mystery]

*********************
Dear Martin,

1. While "Buy and Never Sell" is highly popular among many forumites who are presently investing in the Australian residential real estate, however, I have also learnt from my own present limited real life property investing experiences that it is safer and more prudent for me, to adopt this "Buy-Hold-Sell at Market Peak" where neccessary.

2. "Buy-Hold- and Never Sell" works well for those who can afford to patiently wait, to create wealth exponentially by compounding its growth over TIME.

3. For those who have successfully created wealth for themselves using this investing strategy, so far, I offer you, my sincere congratulations.

4. For those who have not or not yet, I will enoucrage you to please think twice and review your own investing strategy where neccessary. "Buy-Hold-and Never Sell" sounds good in theory but may not actually works for some investors at all.

5. It can be a "riskier" investing strategy when as long term investors, we are unable to patiently wait or/and safely hold on to our ever expanding property portfolio at all stages/times over a long period of time.

6. Some of the experienced investors have personally shared with me how they eventually lost the entire property portfolio, using this "Buy-Hold-Never Sell" Investing strategy during the period where the prevailing high interest rate was as high as 18% and unfortunately, it was to be further followed by the last "Recession that Australia needs to have" in 1991 under the former ALP PM, Paul Keating's time.

7. Provided you can successfully ride out all the "low" periods during each and every successive property cycle and safely hold onto your ever expanding property portfolio, such an investing strategy can be highly risky over time as some of the unfortunate investors who have lost their entire property portfolio, will personally share/tell you their own painful experiences.

8. For your further comments and discussion where neccessary, please.

9. Thank you.

Cheers,
Kenneth KOH

I'm 49 years old Kenneth, .... I first bought property in the early 80's around the 18% interest rate level ..... Since then I've been through a few market corrections and up's and downs in the property market and life. I've had a business that cost me a heap, but guess what ... I'm still here to tell the tale.

I'll stick to my plan mate, but thanks for the advice. I've been through this sort of uncertainty before, .... and I'm willing to keep doing the hard yards to create wealth and success.

If you and your mates want to sell then go ahead.

Martin

 

[Kennethkohsg]

Dear AlexLee,

1. From what I can find and read at http:www.apra.gov.au:

a. The RBA’s role is focused on the objectives of monetary policy, overall financial
system stability and regulation of the payments system. It has no obligation to
protect the interests of bank depositors and will not supervise any individual
financial institutions. The RBA does, however, have discretion to provide
emergency liquidity support to the financial system.

b. APRA is responsible for the prudential supervision of banks, life and general
insurance companies and superannuation funds. Supervision of building societies,
credit unions and friendly societies will transfer to APRA from State jurisdictions
at a later date. APRA has powers to act decisively in the interests of depositors or
policy holders and fund members if a supervised institution is in difficulty.
Sharing of Information

2. Thus, from these stated roles for the RBA and APRA, I am still presently unclear as to who is truly responsible for running the Australian Economy? The Australian PM, the Treasurer, the Finance Minister or/and the RBA?

3. Who actually determine and set the limits concerning the present size and capacity of the Australian Economy and the amount of monies in circulation within the Australian Economy?

4. How do they go about determining the types and size of the labour force required to support the Australian Economy at a particular point in time?

5. What kind of executive powers does APRA has in order to effectively regulate and enforce its control over the various banks and lending institutions and their lending criteria and interest rate to charge for the households mortage loans etc.

6. Who will direct the lending instutions and banks to tighten or loosen on the credit control and lending policies/practices within Australia? APRA? How does APRA goes about doing it? Who set the cash reserve vs lending limit ratio for the banks and other lending institutions?

7. looking forward to learning from you further, please.

8. Thank you.

Cheers,
Kenneth KOH

 

[yieldmatters]

IMO one of the best pieces of investment opinion ( wanted to say advice ) on this forum. Not only applies to property but ALL investment classes. It has a technical name " Reversion to the mean theory" and has proven to be one of the most successful ways to invest.

Have you worked out what reversion to the mean would actually mean for prices in Australian cities? Take a 30 year time series (in real dollars) and put a mean through it. From where we are now to where the mean is looks like a nasty, nasty drop. Something to consider if people are about to jump in - it may become a lot more attractive very soon. For those that are already in it is more complicated - CGT issues etc - and it may be better just to ride it out.

 

[Kennethkohsg]

I'm 49 years old Kenneth, .... I first bought property in the early 80's around the 18% interest rate level ..... Since then I've been through a few market corrections and up's and downs in the property market and life. I've had a business that cost me a heap, but guess what ... I'm still here to tell the tale.

I'll stick to my plan mate, but thanks for the advice. I've been through this sort of uncertainty before, .... and I'm willing to keep doing the hard yards to create wealth and success.

If you and your mates want to sell then go ahead.

Martin

*********************
Dear Martin,

1. Thank you for your sharing.

2. There has been much talk and previous attempts to remove the negative gearing or/and PPOR capital gain tax incentives scheme time to time and especially over the last few years when the housing/land affordability issues were being addressed.

3. Any change in these related policies will have tremendous impact on those investors like yourself, with a sizeable property portfolio and using the "Buy-Hold-Never Sell" long term investing strategy.

4. So many things can happen along the way before the investors have accumulated sufficient wealth to be financially free over time.

5. How then do you seek to minimise these various investing risks over time using the "Buy-Hold-Never Sell" long term investing strategy especially during uncertain times such as presently and the down time for each property cycles?

6. Looking forward to learning from you further, please.

7. Thank you.

Cheers,
Kenneth KOH

 

[alexlee]

5. How then do you seek to minimise these various investing risks over time using the "Buy-Hold-Never Sell" long term investing strategy especially during uncertain times such as presently and the down time for each property cycles?

Ride it out, would be my opinion. All booms end. All busts end. I'd rather have periodic recessions than long unending booms. You minimise the risks the way you always minimise risks: keep the LVR conservative, keep the cash flowing (saving, applying for LOCs, etc) and, most importantly, believe that at some point, maybe in 3, 5, 7, or 10 years, the market will become good again. In the meantime, I'm going to keep buying.

I'm 30. Buy and hold will work for me.

Why the sudden fear, Kenneth? You've always been a calm academic about all of this. Why the sudden cold sweats? You must have considered how a recession would hit your investments before this? You sold some WA properties pretty much at the top, so you should be cashed up. I know I've thought long and hard about a recession, and I've read a lot about various recessions. So now that it might be happening, I'm mentally prepared for it and I have a rough plan to face it instead of running around like a headless chicken. Surely you understand that a down market is the BEST time to buy?
Alex

 

[alexlee]

Have you worked out what reversion to the mean would actually mean for prices in Australian cities? Take a 30 year time series (in real dollars) and put a mean through it. From where we are now to where the mean is looks like a nasty, nasty drop. Something to consider if people are about to jump in - it may become a lot more attractive very soon. For those that are already in it is more complicated - CGT issues etc - and it may be better just to ride it out.

If the market were to instantly revert back to mean tomorrow, you're right. All hell would break loose. However, that's unlikely, because the government has every incentive to keep house prices up (because the majority of people own homes), and people are less likely to sell their homes except in extreme circumstances (i.e. they can't pay the mortgage). People might sell a share when it falls 10% or whatever. They're far less likely to sell the family home even if the price falls. You'll hear a LOT of belly-aching, though.

What's more likely, given that we as humans are VERY emotionally attached to our homes (not everyone is logicaly enough to sell when they think the market is overvalued: we can't all be economists), is that the market drifts down. People batten down the hatches. They spend less, and it's likely the economy will go into recession. We might even start learning to save again or at least pay something extra into the mortgage. Unlike an investment bank having to mark their securities to market, though, the ordinary household doesn't have to report losses if the value of their home falls. They'll be more fearful, will spend less, etc.

In the meantime, the recession will throw a lot of people out of work. It'll also get rid of the excesses built up during the boom (I'm sure you're familiar with the Austrian theory of booms and busts, YM), paving the way for a new boom. It might be years until that happens. You and I, YM, are 30. We have time to accumulate properties and wait 10 years for the next boom. I plan to do that.
Alex

 

[yieldmatters]

If the market were to instantly revert back to mean tomorrow, you're right. All hell would break loose. However, that's unlikely, because the government has every incentive to keep house prices up (because the majority of people own homes), and people are less likely to sell their homes except in extreme circumstances (i.e. they can't pay the mortgage). People might sell a share when it falls 10% or whatever. They're far less likely to sell the family home even if the price falls. You'll hear a LOT of belly-aching, though.

What's more likely, given that we as humans are VERY emotionally attached to our homes (not everyone is logicaly enough to sell when they think the market is overvalued: we can't all be economists), is that the market drifts down. People batten down the hatches. They spend less, and it's likely the economy will go into recession. We might even start learning to save again or at least pay something extra into the mortgage. Unlike an investment bank having to mark their securities to market, though, the ordinary household doesn't have to report losses if the value of their home falls. They'll be more fearful, will spend less, etc.

In the meantime, the recession will throw a lot of people out of work. It'll also get rid of the excesses built up during the boom (I'm sure you're familiar with the Austrian theory of booms and busts, YM), paving the way for a new boom. It might be years until that happens. You and I, YM, are 30. We have time to accumulate properties and wait 10 years for the next boom. I plan to do that.
Alex

Agreed. I actually agree with 90% of what you say - it may not seem that way because I only usually pipe up only when I disagree. Yes - busts can be healthy - gets rid of all the crap assets and paves the way for new growth.

If it reverts to the mean then it may be a slow process - may even be flat in nominal terms while inflation picks up.

Things don't always have to revert to the mean though - something fundamental may have changed which means it is now pemanently priced differently. I however don't see anything really compelling in property though that tells me this is the case.