Australian property market - election implications

The appeal of the Australian property market might take a hit next year for two reasons:

1. If Labor is elected mining investment will be hit. The response might take a few years to be felt because most advanced project investments are committed.

2. If the Liberals win they plan to reduce immigration to 170,000 from 300,000 currently. The implication is that housing demand will be weaker, and thus property prices more subdued than they otherwise would be in the cities.

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AuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Comparing NZ and Australian property markets

St Arnaud Lake, South Island, New Zealand

Here are 10 good reasons why not to buy property in NZ by Bernard Hickey at the NZ Herald. I might add a few more if it pleases you, as well as some good aspects:

More bad news

1. Food prices will perform well in future, though I think Australia will do better with food, minerals and heaps more minerals. Australia kind of has a global monopoly on coal & iron ore development. I can probably identify 60 projects in Australia which have the capacity to last 30 years. There is just so much ore. Even the crappy 30%Fe can be processes simply for 55%Fe. Its not to far from the coast, and there is good infrastructure, and foreign buyers of the stuff prepared to spend money to develop it. There is going to be a lot of money going into Australia. Meanwhile, the Chinese are trying to buy into NZ farming, and voters are strongly against it. So don't expect much foreign investment in NZ.

2. NZ just doesn't have much of a selling point to attract investment. Unless you are a niche medical technology developer, a graphic design or web-based business, you are likely to struggle getting business on the international stage. Its expensive and time-consuming to get to NZ. So is NZ destined to be just a 'retirement hub' where people come to die? I think so.

3. The government finally looks to be doing something about welfare dependence. There are 386,000 NZ'ers on welfare benefits receiving a total of $6.5 billion a year. The biggest rout seems to be single parenting. There 100,000 single mothers who have 180,000 kids among them. No doubt most of them care less about working, and most are going to be terrible role models, embedding an 'inter-generational' culture of welfare expectancies or dependence. The problem is that NZ really has to create jobs for these people.

4. The government is actually making NZ less attractive for retirement by increasing the GST to 15% to fund tax cuts. Having said that most retirees are living on foreign income, and that translates well into low-priced NZ dollars.

by Andrew Sheldon

Some good news

1. There is actually the prospect of some low-income Australians retiring in NZ in coming years in order to benefit from cheap housing and falling airfares. This will also have a benefit for Australians travelling here for tourism, and buying holiday houses. In NZ you can buy a holiday house for $NZ80,000 ($A65,000) near the beach, in Australia they start at $A350,000.

2. Some of those NZ'ers working in Australia's mining industry are going to come home to NZ. Particularly if they are working in the mines in WA, where they are less likely to meet girls and settle in the country. They might thus be more inclined to save and return to NZ with a nest egg.

3. The Australian population is growing so much faster than NZ, 2% compared to 0.5%. There is a flipside however. Australian property is highly regulated. You have 21 million people sharing a continent slightly smaller than China, and it restricts urban land releases, which keeps prices artificially high. Subdivision is very difficult in Australia, even in rural towns. This is because local & state governments don't want to fund infrastructure, whilst also allowing 'tax creep' based on property prices. In NZ you can buy property or 'sections' in rural areas, in town for as little as $30-60K, and you can stick an old relocatable home on it for $50K (including expenses), or build a new one for $120,000 plus. In Australia, to benefit from those dynamics, you will need to live over the Great Dividing Range on the Western Plains, some 1000km away from Sydney, and maybe 60km from a large town, in something resembling a 'ghost town' which has lost all its services. You will be pleased when it rains, because that will be the most exciting thing that happens.

Northing else I can think to add. I think it was a good article. Basically I conclude:

1. If you have money or want to make it, you live in Australia

2. If you have money and want to leave it in your home country, you live in NZ

3. If you have no money and no desire to make it, no one wants you.

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AuthorAndrew SheldonApplied Critical Thinking | www.SheldonThinks.com

Outlook for Japan could be promising

Reading the following article, you might want to consider the merits of buying property in Japan. Property markets in Japan have been overheated for some time. Japan in contrast is relatively undervalued. The question is how long will it remain in this condition. An election is due for March 2010. The question Japanese people will be asking after an annualised 15% contraction in the economy in the Mar-09 quarter, is whether they should continue their support for the Liberal Democratic Party (LDP). The LDP have enjoyed the support of the people for 5 decades - with the exception of a brief hiatus of 9 months. Most of this period corresponded to the Cold War alliance with the US.

With the Japanese economy locked in a 20 year slump, and the export slump in 2008, might the people consider a change? History suggests they are unlikely to change parties. However the long standing bear market suggests the problem is linked to the LDP and not to any particular administration.
The positives side is that the Japanese investors hold "$15 trillion in financial assets", mostly bonds and bank deposits, and "only 3.5% of it in the stockmarket". The positive is that Japanese investors have been sheltered from the economic collapse to a larger extent. The bad news is that they have had 20 years of poor returns, and their equity has shrunk significantly as a proportion of global assets, and more importantly, relative to the number of taxpayers, due to an aging population and zero population growth.
With the Japanese being the most patient slaves in the world to political mismanagement, you might ask how tolerant are they expected to be. The recovery will create a phenomenal investment opportunity because those bank deposits will find their way into the stockmarket. Clearly fund managers are waiting for a sign of political change. Unfortunately the shift in assets itself is likely to delay any shift since markets tend to over-expect prompting politicians to under-deliver.
Interestingly in the Mar-09 quarter, Japanese investors were net buyers of stocks for the first time since 1991. Already the Japanese trade surplus has collapsed. It is only a matter of time before the Japanese yen collapses as well for the following reasons:
1. The savers are not getting any younger - the percentage of retirees is increasing
2. Any recovery is likely to boost spending as well as exports. In the past only the export sector was strong. In the 'future' the domestic economy will need to be reformed, which will result in the broader based economic recovery we have not seen since the 1980s.

You might then wonder what are the implications for investors in Japan, with a falling yen on the horizon, and greater economic rigor. The problem of course is that this is a leap of faith. Japan may not recover for some time. Generally it takes an economic emergency to drive reform. In the case of Japan it might take a charismatic leader who can unit LDP party factions. There is little sign of a voter defection. Instead we are seeing a defection by LDP members into external groups. Surely this will lead to some less entrenched factional outcomes. Herein lies the potential for surprise.

A collapse in the currency is of course not good for investors, though I would expect such a collapse to be quick because broad based consumption and foreign investment (China, etc) will be more important than export surpluses. Clearly the country will need to address its lack of population growth, and such a change could be an important element of reform and recovery, and clearly good for the property market. I would however expect an increase in property taxes since the huge debt needs to be funded. The other question remains the outlook for interest rates. They will most certainly increase, but will they match the foreign increases as we look forward towards higher inflation.

Clearly Japanese stocks make a lot of sense as well. A weaker yen will provide greater stimulus to exporters. These exporters will benefit from retained earnings from offshore assets, as well as greater profitability from retained Japanese plant. Some Japanese stocks also offer excellent exposure to China.

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Andrew Sheldon www.sheldonthinks.com

The attraction of buying Philippines property

We encourage people to buy property over the next few years in the Philippines. There are a number of reasons for this we have described in our eBook, both market related and also regulatory. There is the 2% population growth that few countries can match. There is the even higher rates of growth in satellite cities as people migrate to get jobs. There is the changes to the regulation of land use, which make it harder for people to develop land, and developers to build condos. These factors are just some of the factors which are going to increase property demand and reduce supply. These ideas and many others we explore in our eBook on "Buying Philippines Property". The Philippines is the only property market which has yet to experience a property boom. Its on the doorstep to China, its regional airports are already receiving direct flights from China, and the Philippines is already a Chinese-affiliated country.
The Dept of Tourism in recent years has also upgrades national tourist infrastructure. All the trends are good.....its just a matter of time. The Philippines offers more generous visa conditions than any other country. You can stay on a tourist visa in the Philippines for 18 months before you are obliged to leave. Hardly an obstacle since flights to Japan, China, Singapore and other places are only $US100+taxes, and most people have reasons for a change. The country is of-course English-speaking. Buy the report now!
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Andrew Sheldon www.sheldonthinks.com

The fastest growing cities in Japan

The latest population statistics for Japanese cities shows that the fastest growing cities are:

1. Kawasaki City 1.4%/year

2. Saitama City 0.8%/year

3. Fukuoka City 0.75%/year

These growth rates don't look so impressive, but you need to consider that internal migration in each city adds an extra dynamic resulting in faster growth in some areas, and lower growth in others. For this reason these city-wide statistics are of little benefit if you are seeking to buy property. For instance Tokyo-23 grew at 0.65%, however migration from some areas of Tokyo to others will polarise the average figures.

For this reason we look at the statistics for each village, town and city within the Tokyo and Saitama prefectures. Of course similar analysis can be performed on other prefectures too. If you are interested in population statistics for Saitama or Tokyo, refer to our Population Charts for Tokyo and Saitama precincts. It will give you clues on where to buy property.

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Andrew Sheldon www.sheldonthinks.com