CAPITALISM OUT RUNS DEMOCRACY

I’ve started using Uber. Yes I have succumbed to the concept in of all places the home of Uber, San Francisco. Is it that I’m mellowing or just giving up on the tide of inevitability where big businesses can defy governments, and the laws to push their own agendas? All for what has become the seemingly sacrosanct right to preserve share holder value.

Whether it’s Uber, a large grocery chain, bank or computer/ software businesses it seems the larger you are the less accountability there is for your actions.

In December 2015 the Sydney Morning Herald reported that Chris Jordan (Tax  Commissioner) released information on Australia’s largest companies – “Out of 1539 of Australia’s largest corporate entities, 38 per cent did not pay any tax in 2013-14.”

That’s 585 companies using the system to defeat the system. But hey they are preserving share holder value.

In this quest to preserve the stock values some companies (in the U.S.A) are even trading their own stocks through stock exchanges called “Dark Pools”. With cheap money available these companies see more value in the facade of share price than they do in real investment into their businesses.

The Financial Times describes dark pools as “A dark pool is the romantic – or sinister, depending on your viewpoint – name given to a network that allows traders to buy or sell large orders without running the risk that other traders will work out what is going on and put the price up, or down, to take advantage of the order.”

Their establishment happened after the stock crash in 2007 with the need to counter, the High Frequency Traders computers or bots (robots that undertake trades in milliseconds at the slightest hint of market movement – way beyond what any individual can achieve). By hiding transactions until the trade took place the dark pool enabled large transactions to occur without forecasting them to the bots. However these transactions are  unrestricted, ungoverned and without the transparency of the normal market. So with
companies defying governments, manipulating stocks, not paying appropriate taxes, with a system of stock exchanging moving into dark pools hidden from scrutiny and high frequency traders using bots are we seeing the capital markets, if not capitalism itself, evolving at a pace that is outstripping democracy.

This and the current volatility in the share market means real estate investment should be a major consideration as its market is transparent, and yielding positive returns over bank interest rates.

So why is it then that the government is imposing laws on real estate agents limiting what can be said when marketing properties for auction yet ignoring Uber, ignoring predatory bank practices and ignoring major corporations who are not paying their way.

Auctions are and already were an open forum that has been used for century’s to determine what the value of a commodity is to a market. It enables sellers to achieve the highest price the market will pay on the day and buyers to compete in an open and transparent market place with other buyers. The first thing any buyer asks an agent is “what’s it worth”, “what will they take”, “what’s the reserve”?

Now with the new laws in place an agent is not allowed to guide a buyer and has to be very cautious in what they tell a seller. However despite the new impositions Auctions are still the best method of sale for all parties. In the last 12 months our overall auction
clearance rates at RAINE & Horne Commercial & Residential was 83%.

So what’s in store for 2016:

Industrially
The lingering effect of the down turn in coal is starting to wane as coal companies need to start spending on machinery maintenance. This was evident in the volume of leasing activity in the later quarter of 2015 and at the start of 2016.

The sales of vacant industrial buildings is holding in volume however there are dramatic difference in prices on a per square metre basis. Auctions are finding the buyers even for the toughest property.

Commercially
This sector is reflecting the activity that’s occurring industrially as more money flows through the community. Leasing activity has been strong and vacant buildings are achieving rising prices the closer one gets to the city core. We have a stack of buyers looking for inner city redevelopments.

Investments
With the volatility in the share market more and more money is looking to be placed in bricks and mortar. This over supply of buyers and under supply of income producing properties is pushing yields lower.

2016 has started strong and looks to continue so in the Newcastle and Hunter Region but there are warning signs on a global level, that could trigger massive international debt deleveraging and this could make you glad you own real estate.

Steven Dick
Director
Raine & Horne Commercial (Newcastle)

Leave a Reply

Your email address will not be published. Required fields are marked *