Commercial Property Investors are Relishing the Current Drift

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Confusion
EVER SINCE Julia Gillard announced the September election in February … the ensuring political hiatus has meant almost everything (including our thinking) has simply been moving sideways.

Neither up, nor down … just drifting!

And that is completely understandable — because, when uncertainty reigns … people tend to do nothing.

What are the Experts saying?

Some economists are grabbing the headlines by suggesting there is a “20% chance” of Australia experiencing a recession, within the next two years. Mainly pointing to the US and China as the cause.

But thank goodness, there are some clear thinkers who still prevail:

  1. James Gorman (Australian-born head of Morgan Stanley) who believes “… the US economy is actually much better, growing faster, in much better shape than people think.”
    .
    He sees the recently announced tightening of the US quantitative-easing (QE) as a clear sign the economy is on the pathway to a sustained recovery — evidenced by …
    * consumers being de-leveraged, and primed to spend;
    * stability returning to the housing market; and
    * the US having population growth.
    .
  2. Terry McCrann (Australia’s leading Business Commentator — Business Sunday: 23 June, page 76) explained that “… cutting back on QE, it’s actually in the context of the US economy strengthening. So it is actually a good news message to not just the US but the world.
    .
    “Especially as we know, and Bernanke made it clear, the Fed would err on the side of keeping the party going.”
    .
  3. David Bassanese (AFR Finance Journalist: 15-16 June, page 34) headlined his article with “Relax, don’t worry about China or US“.
    .
    China-PMIHe believes China’s targeted growth (of 7.5% pa) reflects a more sustainable rate, for what is now a much larger economy.
    .
    And unlike most Western countries, China has ample capacity for significant fiscal stimulus.
    .
    The US has shown solid employment growth and consumer confidence has also improved. As such, Bassanese also considers the Fed’s move to tighten “should be seen as good news, as it suggests the US recovery is durable.”

So, why the current Share Market Volatility?

Clearly US bond traders were caught off-guard by the Fed’s announcement. And with most trades computer-driven nowadays … responses have been immediate, as investors and dealers clamoured to minimise their exposure.

As a result, you have probably seen an overreaction — fuelled by media headlines around the world.

However, the more measured commentators regard this as a “bull market correction” … rather than the start of a downturn. And they predict the lower Aussie dollar will provide a welcome boost for our exporters.

Nonetheless, as I said earlier … when people are confused, they “freeze”. And therefore, tend to do nothing.

Therein lies your Opportunity

For Australia, election day will be the turning point for consumer confidence.

From everything I’m hearing, the Coalition will be returned with such a majority that they …

  • will not only control both Houses; but
  • the Liberals could actually govern in your own right, without the National Party.

Such is the current mood of the electorate for change with the Gillard government. But it would probably become a closer contest with Rudd at the helm.

Bottom Line: The past six months has already seen the Residential market fire up. And there has also been a massive influx of Asian money into the Commercial sector.

Savvy investors are out there seeking to take advantage the underlying growth Australia possesses — even if there are others unable to see it, just yet.

Fortunately, a number of my clients have already recognised the current opportunity, and secured well-let Commercial property — ready for the post-election surge.

Are you also going to capitalise on this extremely rare set of circumstances?

Chris Lang

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