Will there be a Investor sell-off before this years Election..

Funny you post/mention this. I was watching your money on ch95 a couple of days ago. One of the guests on the show had mentioned and proved that the stock market has historically performed better when labor have been in power.
I personally was shocked, happy none the less as all I have been doing the last three/four years is filling up offset accounts and buying shares

 

Ditto, but strictly ETF's for me.

 

ETFS, Managed funds and some gold too.

 

Miners, paper, or physical?

 

If i was to guess this may be correlated to demand economics vs trickle down.

 

Perth Mint account. $200 / month.

Actually just looked as i hadn't checked that account for a while.

Gold in AUD is up 11% in a year

 

Quote of the week

 

I love the passion of the young voters here.
There comes a time, though, when you move on to disappointment, frustration, and eventually apathy.

I am honoured, thank you

 

This argument is not supported by the facts. Admittedly, we only have a limited amount of data available from which the facts can be drawn, because NG was only ever removed once before between 1985 and 1987, but it's the only real comparison available, and that experience provided the following outcomes;

1. Rents in only two capital cities INCREASED. And then they actually DECLINED after NG was reintroduced. Those two cities were Sydney and Perth, and both had already seen rents trending upwards before the removal of NG. Sydney and Perth actually increased, then declined, then increased again, within the period 1985-1987.

2. Rents in every other capital city either plateaued or declined in the same period between 1985-1987, and then they all INCREASED after NG was reintroduced. .



So the facts tell us that in all but 2 cities, the period of NG removal resulted in rental declines in most markets, not rental increases. I would actually argue that NG had no impact at all, and it was normal supply/demand of rental that drove these trends. Nothing more. Nothing less. If NG was ( and will be) a driver of rental increases as many here suggest , why doesnt the experience between 1985-1987 support that?

Brisbane . Declined, rose again... basically plateaued over the 2 years
Sydney. initially plateaued. rose a little. declined a little. rose again... overall it increased rents over the 2 years. but rents surged in the 2nd half of 1987 , after NG was reintroduced . Then they plunged in 1989- 2 years later, long after NG had been reintroduced.
Melbourne - flat. in fact, rents declined marginally over the 2 years NG was abolished.
Adelaide- rents plunged. then recovered just before NG was reintroduced, and continued to grow for a year and a half thereafter - then steadily declined over the next 2 years
Perth. Initially a big increase. then a small decline. then a modest increase... then fell off a cliff after NG was reintroduced.

So you can see that the facts just do not support the single greatest urban myth in Australian resi property investment .

Having said all of that - NG is small fish now. rates are ultra low and the APRA effect has been far greater than anything the removal of NG or the halving of CGT concessions could hope to achieve. So I dont understand why everyone is banging on about Shorten and NG.... the greatest threat to your portfolio's is the pursuit of pre APRA thinking. Clearly that particular confusion still reigns amongst many here. Next, some forum members will start blaming Shorten for the market correction that started 18-24 months ago in SYD and MEL. Please....

 

Its amazing how rusted on some of these ideas have become. ie Labor = bad with money. Libs = great with money. Years and years of data tells us the opposite is true, or at the very least, that the results are basically same same.... yet most Australian's would have you believe that the Libs are not only superior economic managers, but significantly so. They would be wrong.

I'm not especially devoted to either side ( and I increasingly wonder whether we could actually do any worse by handing the keys to the lodge to a bunch of independents and letting them have a go for 3 years ) , but I will say that this particular version of the coalition is the most useless I can ever recall - and by quite some distance. They have cannibalised themselves to the point where they appear to facing an electoral wipe out on scale we may never have seen before. And they have only themselves - and a particular core of 4 or 5 nutters - to blame for it.

 

yeah this scares me as who ever is in power, i like a good strong opposition to keep them in check.

 

According to the Libs, if Labor is elected I, with my five paid-for IPs, will be much better off as rents escalate. Not that I believe this for a minute.

Labor's tax proposals actually make me more likely to vote for them. This is partly because I come from UK where NG and dividend tax refunds would be thought bizarre, and partly because I've been self employed for 35 years, always trading as a limited company for tax reasons: thus any losses (and there were a few in the early years) just had to be rolled forward. It was the same with property income, and beyond that UK and overseas property earnings were ringfenced from each other.

The one thing I would like to change (but in another place was told that when this was tried it led to [unspecified] problems) would be to allow CG to be split across several years. If you own a parcel of shares that have gone up astronomically you can sell them off bit by bit; you don't have this option with property.

 

I don’t think any smart investor will jump and buy more properties just to have some negative gearing benefits...and resulting in more demand and boom.... frankly this is just a stupid arguments...

Why lock the money with a huge loan when atleast for next few years the prices are only going one way and that is down....the boom has ended 12 months ago and not coming back for few years....

And on TOP globally we are due for another recession in few years time (just cycle)....this creates a big question mark for investors..

Additionally with tight lending continue to be the case for atleast few more years now, do t think it’s a great idea to buy a property just to be negatively geared

 

Thanks Euro73,

I like your post overall, however I think you extrapolate and project on to me way beyond anything I said in my post.

I simply said that removing negative gearing had an "adverse" affect on the property market. This is to say simply that property prices went down.

I did not mention rent prices at all. However for what it is worth, removing negative gearing should push rents higher as:

1. Landlords seek to cover the recently withdrawn tax benefits; and
2. Scaring investors away from the market will eventually lead to rental property shortages.

Just for completeness, below is a chart from Business Insider showing the largest corrections in they Sydney property market. It does not cover the recent 2018 pullback. But interestingly it does show how rare a 10% pullback in Sydney is (for those who think that now is not a reasonable time to jump in).

So I would disagree that what I said was "not supported by the facts'. Please see below:

 

Issue is you can't tell who the successful policy maker is.

Example Labour introduce National Disability insurance scheme.

Costs billions but the costs don't start until Liberal government get in.

The time frame is too slow and policymakers effect takes years and not always seen in the term of that government.

 

Here's my rookie interpretation of this info, based on the feels I've had over the past few decades of being a relatively cognizant human.

As the economy is growing, people get aspirational, and the general feel is that there is less risk, and less need for social support, the vote swings to libs. As the economy starts to contract, people feel there is more risk, and more need for social support, and the vote swings to labs. This often means the libs inherit an economy on the up, and the labs inherit an economy on the down

The added challenge is that in times of growth, instead of banking those "surplus" taxes in a future fund, you get the (semi-?)permanent erosion of the tax base as the libs are likely to come in to power, and then there's contraction and a shortfall. The suggestion of "improving" gov revenue is suggested (usually by the labs) but it is often at a time like now when the economy is contracting.

I don't think either the libs or labs have an awesome economic solution at the moment (or necessarily ever...) and that side of things will ebb and flow with the "natural" economic cycles. There are, however, a ton of policies and positions apart from economics, and for those reasons I really dislike the libs. You could argue one side is manipulated and controlled by the right wing conservatives with financial power, and the other side is manipulated and controlled by the left wing unionists. These factions too will ebb and flow as the power balance swings between the few in power and the many in subjugation - arguably unionisation is the natural response to industrialisation and the concentration of power with the few elite - the balance will swing back and forth in response to the demand for labour and the potential exploitation of workers ;eg the increase in independent contractors doing FIFO and not needing unions to negotiate during resources boom, and the subsequent reversion to needing permanent employment (and the often associated increase in union membership) with the resources decline. These things will swing back and forth.

My goal as an investor is to become immune to such things. I am definitely more left-leaning, but also appreciate the libertarian perspective (which neither labs or libs subscribe to). I would prefer a centrist approach in both social and financial measures, but this day and age seems to have done away with balance and cooperation - with pigeon-holing in either left or right the only option.

Cheers,
Inertia.

 

this is one of those mindless argument often thrown around,
if one could raise rents, one would, why wait for this or that?

More recently rents have started to fall in Sydney,
holding cost remains the same still rents have started to ease,
why do you think that is?

 

not necessarily. rental yield will start rising but that is achievable also by reduction of property prices.

no. by definition, investor can sell only to other investor or to a first home buyer. As first home buyer rented before the purchase, that transaction doesn't change rental supply & demand balance.

 

Flipping existing property to each other doesn't increase total supply.

There is plenty of access supply hitting market in 2019/20,
besides NG is still applicable for new builds.
albeit if anything it may increase supply more than usual putting downward pressure on rents.

Not sure what shape the new build-2-rent policy takes shape, but under the plan, investors would be offered 15-year subsidies - $8500 per year - to build new homes, on the condition they rent them at 20 percent lower than the rental market price, this may end up putting further downward pressure on rents.

 

Hmmm, not an argument. Let me tease out the process in a slightly less mindless way.

Approximately 30% of buyers are investors. That's material.

So if government policy makes investing in real estate less attractive, buyer's will leave the market to some degree.

Now initially this will just affect prices of current stock. But after a year or two, the decline in prices will affect the economic attractiveness of new construction and development. A fall in dwelling prices will make it less attractive for developers to bring new stock on the market

Now all things being equal, this may not have any impact. But in a city where the population is growing at 1.5% (and 2% in Melbourne), new stock gets absorbed quickly and shortages appear quickly as well.

So if you combine a growing population and a decline in new constructions, ultimately rental prices, not sale prices will be affected. This is why any government policy that intervenes to target the attractiveness of property investing will lead to a reduction in the creation of new investment product.