Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

4 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent is one of Australia's brightest financial minds - a must-follow for articulate, accurate & in-depth analysis." - David Scutt, Business Insider, leading Australian market analyst.

"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision, author of Things That Make You Go Hmmm...one of the world's most popular & widely-read financial publications.

Tuesday, 26 September 2017

Australia's best apartment hotspots for 2018

Apartment hotspots

See my thoughts at Domain here (or click the article preview image below).


New Farm is a super location. 

I've lived in the suburb for a couple of years, and it just gets better and better as a place to live for young professionals. 

In fact, I just bought and renovated a large established apartment there, for investment purposes, with great views in two directions.

If you can buy something that needs a cosmetic renovation, such as adding a new kitchen, bathroom, air conditioning, carpets, or repainting, then you might be able to add some capital value (if not rent in the current market).

In particular, look for a point of scarcity, such as city or river views, or some outdoor space.

Stick to flood-free locations, boutique blocks, and whatever you do, don't buy into a complex with pernicious body corporate issues!

Domain reported that apartment prices in the City of Sydney increased strongly over the year to August, up by +13.6 per cent.

Unit rents in the City of Sydney also rose very sharply, up by +6.7 per cent. 

Saturday, 23 September 2017

Money for Life offer

Our Money for Life seminar is happening very soon - see the details about this cracking event here, where you'll be able to ask the questions you really want answering. 

By the way, there's a special 2-for-1 offer available for here for my blog readers. 

Click on the image below to redeem your offer, and I look forward to seeing you there!


Friday, 22 September 2017

Crunch!

The dream run is well and truly over for iron ore stocks (click to expand chart)!


Ouch.

China's influence: growing, not slowing

China still rising

There is a bit of talk about a slowdown in China, a slowdown in Chinese interest in Australian property, and more broadly even an inference that China's influence on Australia may be waning.

It's true that local lenders have generally stopped financing offshore property investors, and this has changed the immediate dynamics in the Aussie housing market, slowing transactions and settlements, and eventually leading to a slowdown in apartment construction.

This had to happen sooner or later as apartment building was at unprecedented highs, driven by almost exponential investment from China.


Looked at through a different lens, however, the reach and influence of China on Australia may only be just beginning.

Lest anyone needs reminding, China's population is vast, the urbanised population is still growing at a rollicking rate, and it will be for years to come. 


And one thing we know about China is that when something becomes an entrenched trend, due to the sheer weight of numbers it really makes a massive impact.

More fluid movements

Permanent settlers in Australia were previously being recorded at about 20,000 or so per annum from China.

However, within the past few weeks the ABS has discontinued its data series on permanent settlers, and also drew a black line through its data series on permanent departures.

As I noted here in 2015, more than four-fifths of 'permanent' departures from Australia were returning within a year, so the ABS has decided to scrap that data series too - in today's more fluid world, the figures had lost their relevance. 

These changes were perhaps tacit admission that the notion of permanence has less relevance than it used to when it comes to residency.

I know a bit about this myself, since I spend time overseas every year, yet I am considered a permanent resident of Australia.

Many of the Chinese in Australia are present on temporary visas, visitor, family, or student visas, often with a view to achieving residency down the track. 

Fortunately the short term arrivals figures by country of origin are still recorded by the ABS, and they show that China's influence continues to grow, and grow...and grow!


Include those visiting from Taiwan and Hong Kong and the annual number of short term arrivals is now almost 1.75 million. 

Asian century

The 2016 Census recorded more than 3.5 million Aussie residents of Asian ancestry or heritage.

As I have shown here previously, new migrants are overwhelmingly flocking to the capital cities - and staying there. 

Incredibly, the Census data showed that Sydney is now more an Asian city than it is a European city.

Sydney is home to about half of the 509,500 Chinese-born residents in Australia, eclipsing the number of British-born residents of the harbour city, with many more from Taiwan and Hong Kong besides.

The Census noted that in total there were more than 1.21 million Australians of Chinese heritage.

These are astonishing demographic shifts in a comparatively short period of time.

Why do they come?

Chinese come to Australia to escape the political situation at home, and to enjoy the climate, clean air, beaches, and good schools and Universities.

It helps that Australians speak English, too, while the relative proximity to China can be viewed as a benefit. 

Beijing is dreadfully polluted, and has now become very expensive - only very well off residents can afford the overpriced apartments, and there is a risk that asset prices in China depreciate.

Contrary to the daily headlines, real estate in many parts of Australia's cities is comparatively cheap.

Chinese migrants to Australia can aspire to own a big house, on a big block, and with a big car in the garage too.

We know all of that.

But there are more subtle pull-factors besides these obvious points, some of which are not easy to put into words.

At least notionally Australia does not have rigid class structures, 'old money', or the perceived stiff attitudes of other parts of western culture. You can wear shorts and thongs in Australia, and nobody cares. 

A migrant to Australia is free to be someone, and there are already millions of Australians of Asian heritage doing exactly that. 

We know from experience elsewhere that migrants hailing from a certain region tend to beget more migrants, and we're certainly seeing that dynamic in the international student sector

Project these trends forward, and you can see that from Australia's perspective the Asian century to date is merely a nascent phenomenon. 

Thursday, 21 September 2017

Bedpans, bitumen, & Bachelor's degrees

Employment boom

Australia has created an extraordinary ~325,000 jobs over the past year, including a boom over the past six months the like of which arguably hasn't been seen in decades. 


The question is how? And where?

Greater Sydney (+83k), Melbourne (+59k), and now Brisbane (+46k) have each seen a drive in employment growth over the past year. 

Greater Sydney now has a monthly unemployment rate of only 4.46 per cent, and the annual average unemployment rate across the harbour city continues to decline, as it has for 3½ years now. 

That's been partly driven by apartment construction and the associated multiplier effect, and a swathe of infrastructure projects. 


Increasingly Hobart is firing up, adding +6k jobs over the year to August 2017, with the median duration of job search continuing to decline. 


Where else?

Gold Coast (+21k) and Sunshine Coast (+12k) have been other contributors to Queensland jobs growth over the past year, presumably driven by tourism, while Toowoomba added a cheeky +5k of new jobs on a net basis. 

Emerging from the resources doldrums, meanwhile, Mackay (+10k) and Townsville (+17k) have clearly turned a corner of sorts lately. 


Construction still raging

Over the past quarter the greatest employment gains were to be found in construction (+64,600), healthcare & social assistance (+48,000), and education & training (+25,700).  

Between them these three industries have created net new employment of +263,000 since August 2016, which really is a huge number. 

Alongside tourism, a boom in international students and education has been a shining light of the economy in recent times - at least in terms of quantity, if not quality.

Offsetting this, some professional services and administrative employment has been scaled back. 


The construction employment surge needs to be viewed in the context of the preceding resources construction boom, which took construction employment to already unprecedented levels. 

And now total construction employment has elevated further - thanks to a combination of residential and infrastructure projects - to 1,168,000. 


The wrap

Sydney's economy is clearly relishing its stamp-duty-funded infrastructure boom.

At the industry level, healthcare & social assistance may well continue its structural uptrend, perhaps eventually accounting for ~15 per cent or more of the entire workforce. 

Construction now directly accounts for ~9.5 per cent of Australian employment. This is much more surprising, and it's never been higher.

This is why, in my opinion, it may pay to be sceptical about all the casual chatter about rate hikes.

Residential jobs account for about three quarters of total construction industry employment.

So once the residential building sector inevitably slows over the next year or two, total employment growth could be winching itself down to earth with a big, clumsy thump. 

Wednesday, 20 September 2017

Vacancies falter

Resources recovery

August 2017 was a softer month for job vacancies on the Department of Employment's index.

The trend is now +6.4 per cent higher than a year earlier, and +23.8 per cent below the October 2013. low. 


Despite the weaker month, Queensland and Western Australia still experienced double digit growth from a year earlier, with a decent lift in Victoria. 


The annual figure was down in Tasmania, but that's as likely related to a surge in employment uptake based on other indicators.

The wrap

It's good to see that vacancies in Western Australia are now well off the lows of 2016, at about 12 per cent higher.

But nationally, this was a softer result. 

Perhaps this is an early indicator that the economy is set to underwhelm in 2018.

Westpac's Bill Evans, always worth following closely, sees no rate hikes in 2018 on this basis. 

Tuesday, 19 September 2017

Mean dwelling price rises to $679,100

Dwelling stock rises to $6.7 trillion

Four times per year we get the unbridled pleasure of the official residential property price indexes. 

Here, then, is a 60-second overview of the June 2017 quarter figures. 

The total value of Australia's dwelling stock rose by +$631 billion or +10.4 per cent to $6.72 trillion in the 2017 financial year. 

That now represents a +53 per cent increase in dwelling stock value from the $4.4 trillion recorded at the end of 2011. 

I'd take the data series back further, but since it only begins in Q3 of that calendar year, I can't.


The annual stock value gains were mainly driven by the two most populous states. New South Wales (+$336 billion) and Victoria (+$215 billion) accounted for some 87 per cent of the total increase. 


Detached houses have outperformed attached dwellings on average since 2003, reflecting rising land values and a relative scarcity of this dwelling type in the thriving, landlocked suburbs of Sydney and Melbourne.


Over the June 2017 quarter the attached dwellings index performed strongly, however, helped along by the +11.7 per cent year-on-year gain for attached dwellings in Sydney (with the harbour city retaining a healthy weighting for that dwelling type). 

City by city

There were strong quarterly residential price index gains in June 2017 for Sydney (+2.3 per cent) and Melbourne (+3 per cent), with those two capital cities recording a twin +13.8 per cent annual increase. 

The Reserve Bank of Australia noted in its September Board Minutes released today that Sydney market conditions had eased in recent months, as reflected in softer auction clearance results and various other timelier measures. 

Annual price growth in Hobart notched up a pacy +12.4 per cent - with more to come later in the year - while there was steadier price growth in Canberra, Adelaide, and Brisbane. 

Perth and Darwin recorded further declines, but the pace of decline has slowed, and more timely measures suggest that conditions appear to be levelling out somewhat in these resources capitals. 


The mean dwelling price in Australia increased by $51,700 or +8.2 per cent in FY2017, to hit a record high of $679,100.

In New South Wales, the mean dwelling price rose to $903,700, possibly helped along by the sale of Sydney's most expensive house in the second quarter of the calendar year (the 'Elaine' estate in Point Piper, which transacted for a lazy $75 million or so - punchy). 


Finally, the number of dwellings increased by +2 per cent or +190,500 over the financial year to 9,906,100.

That's now well ahead of the rate of the official population growth, as the supply response hits its straps. 

There was a substantial increase of +2.35 per cent in Queensland's dwelling stock in FY2017, or +45,500 additional dwellings, reflecting the high volume of apartment completions in inner city Brisbane and elsewhere. The state population probably grew by ~75,000 over the same period. 


In absolute terms there was a robust uplift in the total dwelling stock of New South Wales (+50,900) and Victoria (+53,500), although in Victoria's case even this record rate of new dwelling construction is not keeping up with rollicking population growth.

The wrap

As always, the interesting stuff is in the detail, but the overview shows that Melbourne's housing market was still powering along in the second quarter of 2017, while Hobart will glide into top gear in the latter half of the calendar year. 

Trend new motor sales hit record

Car sales power on

The so-called "canary in the coalmine" that was falling new motor sales has turned out to be another rubbish indicator.

The canaries have long since carked it, but the trend result for new motor vehicle sales was 100,809 in August 2017, which was the highest ever.


Selfish Urban Vanity

Sports utility vehicles continue to drive the record results, although in reality today's small SUVs, such as the one I drive, is probably more akin to a passenger vehicle rather than anything more rugged. 


Alas, production levels domestically are destined continue their precipitous decline as the industry departs Australian shores. 


Finally, the state level data shows that Melbourne's burgeoning economy continues to power new car sales along.

New South Wales also saw nearly 398,000 units shifted over the past year, for yet another annual record. 


New motor vehicle sales were also higher year-on-year in Queensland, Western Australia, and the Northern Territory as the mining downturn draws to a close.

Strangely new vehicle sales were well down in Tassie in August, being some 12.1 per cent lower than a year earlier.

Maybe everyone's too busy buying houses down there to worry about cars right now.