A refresh session on the Bullshido of the Real estate lobby never goes astray, and is always informative.  This hot serving came out of the Rupertarian.

Federal election 2016: property chiefs fight negative gearing change

http://www.theaustralian.com.au/federal-election-2016/federal-election-2016-property-chiefs-fight-negative-gearing-change/news-story/6b1fffb12fed8ff80369efdb553a9426

THE AUSTRALIAN

12:00AM JULY 5, 2016

Samantha Hutchinson

 

The nation’s top property executives will meet this week to consider their next moves in a battle against cuts to negative gearing, including whether to raise more cash for a fighting fund aimed at quashing support for Labor’s controversial plan.

A group of 19 real estate agencies, including Ray White, ­McGrath, LJ Hooker and Raine & Horne, spent hundreds of thousands of dollars on the campaign called Negative Gearing Affects Everyone in a bid to fight Bill Shorten’s plan to limit gearing to new housing.

You could imagine the mood in that meeting.  Here is a load of mainly men who have spent large sums of money cluttering your letterbox, filling in your radio time with their message, paying the finest shills in the lend to exhort forth from the pages of the Rupertarian and Domainfax about the evils of limiting Negative Gearing to new construction only from mid 2017 – running long on the rising rents or collapsing prices – only to find……

A hung parliament (with half the hang having an openly stated policy of removing Negative Gearing from existing housing from mid 2017).

There is likely to be some tension in that meeting.  Standard business process would look for some sort of accountability and measurement of the project to fend off Negative Gearing reform during the 2016 election campaign, vis the costs it has thus far incurred – would someone suggest there could be better ways to spend the money and other positions to take?  But we know better, they will not have thought one iota about anything other than the need to spend more, which means the need to collect more to spend.

The group, which includes high-profile executives including John McGrath and Brian White, will discuss whether more cash needs to be contributed to push the campaign forward amid uncertainty over the election result. “We’re not saying the job’s over and it’s all finished. It’s really ­important we continue to stick with the message because no one seems to remember the carnage that happened back in 1987,” Ray White chairman Brian White said, referring to the Hawke Labor government’s 1985 decision to abolish negative gearing, which triggered soaring rents in Sydney and Perth.

It is here that the phenomena the French refer to ‘gêné’ comes into play.  Mr McGrath is one of Australia’s legendary embarrassment proof business identities, having successfully offloaded a stake in his company to investors who have subsequently worn a hell of a shellacking en route to losing lot of the money they invested.  His track record suggests that he would like someone else to contribute the more cash referred to.  The other members in the room will be acutely aware the Real Estate Ponzi is starting to become more skittish.

‘No one seems to remember the carnage that happened back in 1987’ This is possibly because there wasn’t much carnage back in 1987.  What did happen is nicely illustrated by this MacroBusiness chart.  The ‘soaring rents’ in Perth and Sydney (caused by local factors rather than the removal of negative gearing) were complemented by falls elsewhere.

MB NG 1987 Illuminator

“People say this is self-interest, but if the market deteriorates and house prices deteriorate then everyone suffers … nothing changes the morale of a country faster than changing property ­prices.”

People saying this is ‘self interest’ have their fingers on the pulse.  These men live off real estate commissions – meaning more sales at higher prices contributes more to their self-interest. This is a room full of real estate agents, at the high point of a price bubble which has stretched for year and is showing signs of wear and tear.  The way down could see fewer sales or declining prices which would see these men doing the same work for less money, possibly even having to compete.  The predominating thought here is ‘This isn’t fair!’

But self interest kicks in.  They have a couple of million Negatively Gearing human shields to hide behind, and the rational mind is never far from bringing these to the surface for an airing.  The same as a blue ringed octopus glows, or in the same way some insects are bright colours just to let predators know they shouldn’t be messed with, these guys need to remind anyone thinking of change about the people who may get hurt, and it isn’t them they are talking about….

Ray White and Century 21 are believed to have been among the largest donors to the campaign, which argued changes to negative gearing would force house prices lower, limit the flow of rental stock and threaten the financial security of property investors.

There isn’t any reason to doubt this, the same as there isn’t any reason to doubt these guys would sell their own mothers to ensure that the Real Estate Ponzi (from which they are the major beneficiaries) continues.  But the questions from here are

  • Is forcing house prices lower necessarily a bad thing?’
  • How much would the removal of Negative Gearing affect the flow of rental stock, given that 93% of all Negative Gearing occurs with existing housing (so it isn’t contributing on iota to greater supply of rental stock)?
  • Is threatening the financial security of property investors such a bad thing if they are impeding the economic competitiveness of Australia, if all they are doing is speculating in housing rather than investing in it, and how much would those utilising interest only loans for their speculative positions actually be threatened? (as well as at what point to speculators take responsibility for their own speculation decisions?)

The group met Malcolm Turnbull and Treasurer Scott Morrison during the campaign, but had no contact with any members of the opposition.

Priorities for the group now are to ensure that they are well placed to negotiate with the Labor Party if Mr Shorten is successful at forming government.

Must have been a great meeting, the former real estate lobbyist in ScoMo as chaperone would have been nice to have given that Malcolm had in the past asked some pertinent questions about the value of Negative Gearing.  Presumably they were meeting to see how the funds they were spending on supporting the Torynuffs and to touch base with the counterparty on what they probably thought was a win (Liberals win election) – win (nobody touches Negative Gearing) outcome that ultimately hasn’t quite delivered, for either party.

Now they are going to have a meeting with Mr Shorten, who has found that his policy (which they have said will impact on millions of Australians) hasn’t really had much negative electoral impact.  They want him to back away from his openly stated policy of curtailing Negative Gearing from mid-2017 to newly constructed houses only.  One assumes that meeting will run long on the use of words, ‘reconsider’, ‘revisit’, ‘alternatives’, ‘impact’ and ‘please’, ‘pretty please’, or even ‘we beg you’ and, depending on the skills of the plenipotentiaries they send, could involve tears.  After that phase has passed there would be threats of well funded campaigns against the ALP, and more letter box, radio, TV and social media heat on behalf of property speculators.  It is all for form’s sake though.  They will know Negative Gearing is gone if the ALP makes it to government, and that’s why they need to sow the electoral field now for the next election, whenever it may be.

“If Labor does win and assumes government, then we need to be in a position where we can talk to them about their process … I guess we are reacting to a policy that isn’t well thought out,” Real Estate ­Institute of Australian director Neville Sanders said.

Neville presumably is angling for any and every last spider rogering area of doubt he can find with the ALP policy……maybe there are little old ladies he can find who will be negatively impacted and bring to the attention of the ALP under the guise of it not being the idea they have problems with but the details.  Bogging politicians down in details is always a solid way of slowing things down.

The institute co-ordinated the campaign, which also had input from each of the state and territory real estate institutes.

We can be sure that every last real estate agent and beneficiary of ever increasing prices and transaction volumes in Australia has been sought out by these men with a view to getting them to chip in to help by the necessary influence to help divert, distract or threaten to the point of backing off.  And despite all that effort all they have to show for it is a hung parliament.

Peak body The Property Council of Australian ran a parallel campaign, arguing that a change to negative gearing wouldn’t just ­affect high-income earners, but a wide-ranging demographic.

This of course is another variant of the human shield approach.  They need to somehow let everyone know that although the major beneficiaries of Negative Gearing tend to the quite wealthy there are lots of little people in for their scraps off the table, and that these will lose their scraps with Negative Gearing reform (even though they actually wouldn’t under the ALP proposal – which is to grandfather those currently Negative Gearing – and that the real worry for the Real Estate lobby is that future buyers will not be able to Negatively Gear and will subsequently be inclined to pay and trade less, meaning fewer and smaller commissions for the RE lobby).

Internally, the industry has ­regarded the campaign as a ­success, with some early data indicating that areas with a high proportion of investment property owners delivering gains to ­the Coalition, or experiencing swings to Labor that were smaller than the broader average of 3.7 per cent.

Internally, I am sure there is ample data showing the campaign was a success.  The nature of contracts for marketing and promotion services tend to include measurement and data requirements backing up the fees and the marketing and promotions people are good at providing this.  Back in the real world these guys are eyeballing a hung parliament.

More pertinently they are eyeballing a hung parliament which is going to be under considerable budget scrutiny real soon, and is likely to ask questions of the ‘bang for buck’ nature about some of the supports for the real estate lobby built into Australia’s taxation and budgetary settings – including

  • Negative Gearing,
  • Capital Gains Tax Concessions,
  • the non-application of existing laws to foreign buyers of Australian Real Estate
  • the use of SMSF’s to avoid tax and speculate in Real estate
  • the lending practices of Australian banks for Real Estate speculation purposes

One hopes the Real Estate lobby has contracted with a marketing and promotion services provider to ensure the finest bullshido quality data is available to stymy examination of these, or to focus on the process to delay change as long as possible, enabling existing beneficiaries to exit positions.

Data compiled by the council revealed that seats with a high proportion of investor-owned housing, including Chisholm and Deakin in Victoria, Banks and Reid in Sydney, and Griffith and Brisbane in Brisbane, all gained Coalition support or experienced only marginal swings to Labor.

“There is a correlation between electorates with high numbers of investment property owners and a lower than average swing against the government,” council chief executive Ken Morrison said.

“There’s been a fair focus on the impacts of negative gearing changes and we believe that was well argued at the time.”

That well argued at the time focus saw a national 3% swing against the party arguing for no change to Negative Gearing of Real Estate.  Unless the Real Estate lobby finds some more people that think they invest in Real Estate to use as human shields they have major issues going forward.

Make sure you have popcorn handy.