Sensible investors are unlikely to be swayed by RBA meetings or political shenanigans: Terry Ryder

It’s amazing how a significant national decision or event can bring investor decision-making to a dead stop.

My experience of seven years with a property investment website is that any interest rate decision, whether up or down, causes a temporary shutdown of normal business.

A federal budget has the same effect. So too does an election.

So there was a perceptible pause when last week’s interest rate change was following a week later by Wayne Swan’s budget.  

None of these things should have that impact but experience shows that they do – not because the reaction is realistic but because the perception exists and perceptions matter.  

When Julia Gillard gave unprecedented warning earlier this year of the impending federal election – a case of dead woman walking if ever I’ve seen it – the speculation began instantly about how it would cause the recovery in property markets to stall.  

So the Hotspotting team did some digging and asked a range of people who do real research, rather than indulge kneejerk speculation, what they had found.  

Professor Jakob Madsen of Monash University said he had “searched for evidence that elections affect the housing market but found nothing”. Michael Matusik of Matusik Property Insights said there was no historical evidence that election campaigns impacted on housing markets. And Louis Christopher of SQM Research said: "The only quantifiable impact of a federal election occurs on the actual day of the election."

Yet economists and other attention seekers continue to babble about markets slowing down because an election is looming.  

Any change in interest rates, whether up or down, makes consumers stop to reconsider their plans while they ponder what’s behind the change.  

Changes in interest rates should be irrelevant to property investors. In the past 20 years we’ve had 52 changes in the official cash rate, including 25 reductions and 27 increases. We can be sure that the next 20 years will have a similar pattern, with many changes in concert with movements in the economy, inflation and world events.  

Yet people contemplating a mortgage that will span the next 20 to 30 years delay decisions to await the next Reserve Bank meeting.  

What these kinds of reactions tell us is that very few people have anything resembling a long-term plan. No one should approach property investment without goals and strategies for achieving them but, in my experience with investors, very few have a coherent game plan.  

The sensible minority who have their plan of attack sorted are unlikely to be swayed by RBA meetings or political shenanigans or speeches by the federal treasurer.  

Anyone with a strategy, a belief in the future of Australia and a devotion to research would be just getting on with business.

Terry Ryder is the founder of hotspotting.com.au