Politics or property—you ready to play?

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Australian Real Estate
Jospephs Gate

If you want name and fame, roll your dice towards politics. To secure a financial future, make a run towards property investment

In Australia, cashing in on politics is not as easy as it is in India. Winning a seat in India is a guaranteed source for illegal money. Very rarely does one come across a politician serving the community over his own interests

As we are nearing our federal election and the council elections later this year, it is the perfect time to look at Politics vs Property. What kind of politics will be in play this year when it comes to property? And which is a better investment to become wealthy—Politics or Property?

When Australia had a mining boom, just before the last federal election, the nation was riding high on its economy. Politicians now want to introduce the mining tax and go after all the workers and companies who are making money in the mining sector. This scaremongering about people becoming wealthy on Australia mines has inflicted severe wounds on the mining sector. We will not recover for a decade.

At the moment, commodity prices are lower and we would expect it to stay this way for quite a few years. Oil is down and so is the share market. All we have is the property market, which is doing pretty well, with the construction industry having absorbed the jobs lost in mining and other sectors. This will be an opportunistic moment for all politicians to go after the construction sector. If they have their way, hell will break loose and bring this sector to its knees.

Politicians will use the same scare-mongering tactics to gather votes, promising the public that they will punish property investors. The debate will be about negative gearing and taking away capital gains tax benefit.

Liberals and Labour alike are talking about the negative gearing on the properties. Labor leader Bill Shorten has already promised to get rid of negative gearing on existing properties if elected.

Let’s be clear—for now they might be looking to target property investors. In future, it will be the homeowners. So, if you are thinking that they are going after cashed up property investors, soon they will come for home owners. Politics won’t stop till they tax your place of residence.

As the Melbourne and Sydney auction clearance rates are more than 70 per cent, the pitch of property bashing of politicians will be at the 70 per cent level too.

Politicians hold close $350 million worth of property in Federal Parliament. We won’t see any change in existing properties. According to research by Deakin University, MPs hold 500 properties or more in total. Some MPs have 18 properties of their own or more. Federal MPs base salary is around $200,000. Anyone with that kind salary will be an aggressive property investor or using negative gearing. They will be the biggest losers. Rest assured this is just for votes.

 

“The difference between prosperity and poverty is Property”

On average GDP per capita measured in purchasing power parity is twice as high in countries with the strongest protection of property. If the property protection shows sign of deterioration, GDP per capita drops to one fifth of the countries with strong protection.

Property rights are a powerful incentive for wealth creation. Any country which has secure property rights and good incentives to property investors has prospered. There is a clear connection with property security vs countries prosperity.

Thus, if our politicians want to create a stable, prosperous economy, I think they shouldn’t be looking elsewhere to get there extra money.

As for which makes you more money—politics or property?

As the council elections are nearing, Indians will be contesting in droves. In Melbourne, they will be contesting from Councils like Wyndham and Dandenong, and in Sydney from Liverpool and Parramatta. In councils where there is more than 5 per cent Indian population or more than 100 per cent growth in Indian population, you will see Indians contesting.

You may wonder, is it the salary which is driving them to become councillors? The wage for being councillors is not that great. Politics is more a fame and name game for a lot of Indians. Migrants from India are connected with some kind of political party in India and at the house functions all they talk about is what’s happening in Indian politics.

Everyone has an opinion about politics. So, Indians love to be associated with a prominent politician or be a part of political spectrum. Contesting for council election doesn’t need an endorsement from either the Liberal or Labour party. All one needs to do is put in an application and stand for the elections. If they win, they look at a brighter future and think of cashing on their winnings. It’s like gambling, if you look at it.

In Australia, cashing in on politics is not as easy as it is in India. Winning a seat in India is a guaranteed source for illegal money. Very rarely does one come across a politician serving the community over his own interests.

If you are going to invest time or money in Australian Politics or Property, think of it this way—at least property has long term positive returns. If you just want a name, politics is the way to go. To make money, stick to property investing.

 

The writer is a successful property investor and strategist in Australia and India. He manages a group of companies involving exports, farming and real estate and is the Secretary and Founding member of Festivals of South Asia Inc, Which is among the largest not-for-profit organisations in Melbourne. In 2008, he received the Victorian Parliamentary Friends of India of the Parliament of Victoria “Award of Excellence” for Youth activities.

He does not sell property, loan products or endorse any commercial entities dealing with real estate. His analysis is independent and unbiased.

Disclaimer: The author’s views are intended only to inform and illustrate. No reader should act on the basis of any matter contained in this publication without first seeking appropriate professional advice that takes into account their own particular circumstances

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