Choo Choo... The Boom Train Is Racing Towards You

Property is the most important sector in the economy. APRA is obviously unaware of this as it continues to attack both those employed in construction and those who employ them, which includes owner occupiers and investors.

However, I am not complaining because those of us who have properties already, be it our home or investment properties, will soon see an APRA caused property boom.

This will be the first national property boom.

Historically, the Australian States and various regions of those States have moved independently of each other as they are generally subject to local forces.

APRA decision to meddle with the national market is no different to them issuing a speeding ticket on the Australian property market, and particular to Sydney.

This is no different to the erroneous conduct of the RBA when they increased rates in 2004 and 2005 which did little or nothing to slow Sydney but instead resulted in a 22% boom in just one year.

As a consequence, many builders were attracted to Sydney and it was well supplied with stock for the next five years. However, Sydney saw virtually zero growth. History is repeating except this time there is not a huge supply coming into the market. The result of which is a national property boom!

Chart 1 shows the only sector that competes with construction is the finance and insurance sector with 10% of gross value added.

Chart 2 shows the real value of construction, supplying 9% of jobs and in contrast, the finance and insurance sector provides less than half of this.

When you buy an investment property or a home you are contributing to the coffers of the Council, a charge to approve and monitor the development. The State Government that has its relevant charges which include stamp duty.

The Federal Government collects PAYG rivers of gold coming in from construction and of course company profits from the multitude of companies who are involved in construction.

The impact on retirement for those that try to be self-funded is now impacted by the APRA amendments. The Treasurer seems to be distracted or not fully drilled down with the specific knowledge that is required to play forward a few generation's the impacts of probably knee jerk decisions. If APRA and the Government ignore the direct results of the meddling, then those that wanted to be self-funded retirees may well be in the que at Centrelink.

So APRA has as a consequence of the rules that the bank are to tighten lending policy and restrict interest only loans has only pushed more money to the banking sector which makes them very profitable.

The APRA changes are unquestionably at your expense. The new mortgage stress with the move to push principle and interest takes away the ability to hold more property because the Principle is just an attempt by APRA to reduce household debt. P & I does not permit the proper application of the tax write downs that are legal and are used by a lot of the Politicians and by me, which is how I created my vast portfolio. Economic experts do not recommend P & I when using time lines and leverage principles.

This issue will really begin to boil over when local councils and State governments start to complain about their loss of revenue from the APRA restrictions causing the construction companies to fold up.

When this happens the State Federal Treasury will undoubtedly tap on the Federal Treasurer’s shoulder and inform the Federal Government that the APRA moves have stifled the government coffers.

Historically, these bureaucratic blunders don’t last usually more than eighteen months but this one has run now for more than two years.

The greater general public who are not privy to the Club insights may well have no idea, until it is too late for them. If you are a Club member it is a great time to tap on your mates arm and say, join the Property Club.

We have some excellent opportunities with completed stock in capital cities that have not yet peaked, so speak to your branch today.

Our Club system has properties which cost you no more than $2 to $7 per day! That’s why we create more millionaires than any other.

So Choo Choo… the Boom Train is leaving the station, make sure you get on board.

Regards,

Kevin Young

Stay tuned for next week’s Insights! APRA and the Treasures are caught with their pants down as construction and Government tax income crashes 29%.