Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyers agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds & private investors.

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 better 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 bestsellers 'End Game' and 'Code Red'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Wednesday, 25 January 2017

Alibaba and the fifty-four per cent increase

Open sesame

A folk tale of mystery and intrigue indeed, from Alibaba's quarterly for the December quarter of 2016.

There is a lot of conjecture about whether China's reported economic growth of +6.8 per cent is real or made up. 

It's often argued that the true rate of growth is much lower, but there is also some evidence that stimulus has gotten things moving again in 2016. 

In that context, a quick look through Chinese e-commerce group Alibaba's latest quarterly results for December 2016 is enlightening.

Being traded on the New York Stock Exchange (NYSE : BABA), the numbers should be somewhat less rubbery, if not exactly water-tight.


Summary financials

Year-on-year revenues for the 3-month period were up by a blistering 54 per cent to RMB53.2 billion (US$7.7 billion), with revenue for the "core commerce" or retail segment up by 45 per cent from the prior year to RMB46.6 billion (US$6.7 billion).


Source: Alibaba

The group now reportedly has half a billion mobile monthly active users. 

If SEC filings and summary financials aren't your thing - and who could blame you? - visualise instead a PowerPoint presentation featuring lots of charts like these and you'd have the general picture...


Source: Alibaba

The group reported strong growth in cloud computing operations, mobile revenues, digital media and online marketing services (more clicks!), plus growth within some recently consolidated acquisitions. 

The group reported an astonishing US$4.9 billion in free cash flow in the quarter (on a non-GAAP basis), sending the share price blazing through $101, up from below $61 during the early part of 2016.

These enormous figures imply that billions of dollars are available to invest in growth in engagement "globally at a record scale".

NSW stamp receipts shatter all-comers records (Ausgrid)

Stamp mania

With a record construction boom and rising Sydney dwelling prices, it shouldn't be a surprise that stamp duty and transfers paid rose to record highs in FY2016.

In fact, the NSW state budget surged into a massive $4.7 billion surplus in 2015-16.

This result was miles ahead of forecasts and left the state government with net debt of less than zero.

Yep, the state government moved into a cash positive position for the first time ever.  

To complete the virtuous circle, billions of these funds need to be rolled into urgently required infrastructure projects, not least to plug the hole in the economy that will be left by declining housing construction from 2018 forth. 

Although there was all of the usual carping about the NSW budget - which had forecast that stamp duty receipts would hold up in FY2017 - what the critics failed to calculate is that Sydney is the midst of a construction boom combined with asset sales (the folly of analysts believing they are smarter than market insiders and public company CEOs, despite asymmetric information).

The number of transactions jumped to above 25,000 in November, and total receipts seared to an unprecedented $1.78 billion in the month.

Just to put that number in context, the prior year equivalent figure was only $729 million, and the previous record for any individual month was just $1.2 billion.

The November number is so much higher than the prior year that it seemingly defies logic, although there had been a change in purchase duties for non-residents, and then there was the $16 billion Ausgrid sale.

No surprises then that the YTD budget has been blown out of the water, with annualised receipts rising to $9.3 billion by December, thereby tripling the levels seen at the beginning of the decade. 


Plenty more where this came from in 2017 as apartment completions hit the market (recall too that the 2016 NSW Budget introduced a 4 per cent surcharge purchaser duty on the acquisition of residential real estate by foreign persons from June 21, 2016.).

It's important to recognise that the record windfall represents a surge in pre-sold apartments rather than any recent increase in market liquidity.

What an extraordinary windfall for NSW, with excessively high property taxes now bankrolling the entire shebang. 

Tuesday, 24 January 2017

Soggy with damp patches

2016 slowdown

First, the good news! Total employment increased to 12,093,400 in seasonally strong December, the highest number of employed persons in Australia's history. 

After a blistering year for jobs growth in 2015 when more than 300,000 jobs were added, the last calendar year was considerably slower, with employment growth sagging to +89,2000 or +0.74 per cent. 


Greater Melbourne, in essence, added the new jobs on a net basis last year. 

The main change during the year was that annual employment growth in Greater Sydney slowed all the way back to 1 per cent, from a massive 4.2 per cent at the 2015 peak.



And in Greater Brisbane, employment growth stalled.



It's not all bad news though. 

A whole range of metrics confirmed that the economy went into a very soggy patch in the third quarter of the year, reflected in a negative GDP print, but there does appear to have been a bit more momentum picking up towards the end of the calendar year.

Around the major capital cities, only Greater Sydney is in fine nick from an unemployment rate perspective - sporting an unemployment rate of under 5 per cent - followed by Brisbane and then Melbourne.  

In Greater Perth, the trend is still upwards. 


Around the traps...

The ABS figures don't cover all sub-regions in detail, but it's clear that the resources-influenced regions have endured a tougher stretch since the peak of the resources construction boom in 2012.


That said, it does seem that in many areas employment may now be forming a base.


You may snort with derision - as indeed you are entitled to! - but Louis Christopher of SQM Research believes that some of the hardest hit mining regions such as Karratha in Western Australia may now be passing a housing market nadir. 

It's usually well worth taking careful note of his market analysis.

Lending finance jumps to 9-year high

Lending bites

There was a 14.8 per cent seasonally adjusted jump in commercial finance in the month of November, taking commercial finance up to 5.9 per cent higher than a year ago. 

Property investment loans were a key driver of the increase, although housing finance for owner-occupiers was flat in the month.

Click on the charts to expand them, as always! 



Piecing it all together lending finance spiked 9.8 per cent higher in November, following a 0.6 per cent rise in October. 

All up, then, total lending finance jumped to $76.3 billion, the strongest monthly result since 2007 and the third strongest month on record.

In trend terms, total lending finance is now just a fraction below the highs recorded in 2015. 


There has been a small rebound in commercial lending to the mining industry since September, supported by the commodity prices surge, while the construction, storage, and transport sectors have seen moderate increases. 


Animal spirits?

Business seem to be making some use of low rates, with the economy and full-time hiring apparently picking up a bit of pace again into the end of 2016, following a soggy patch.

It very much looks as though interest rates will be on hold for a long while to come now, but Wednesday's inflation figures will be watched closely as always. 

Monday, 23 January 2017

NSW investors blow the doors off

Sydney investors return

November's Lending Finance figures revealed a considerably improved month for commercial loans, with a 14.8 per cent increase in commercial finance. 

Personal finance also increased by 6.4 per cent, while lease finance was up 3.1 per cent.

So it was a much improved month for lending overall.

By far the most striking trend, however, was the return of property investors to Melbourne, and especially Sydney.

Investor loans were 23 per cent higher than in November 2015 in Victoria, with investor lending having been hindered by macroprudential regulatory measures in the preceding year.

In New South Wales the value of loans was fully 40 per cent higher than in the prior corresponding period, confirming suspicions that parts of the Sydney property market were off to the races again at the end of calendar year 2016.


At the other end of the spectrum, the value of investor loans in resources state of Western Australia was down by 13 per cent year-on-year.

Mortgage arrears are also likely to show further increases in the Northern Territory, with dwelling prices in decline and elevated vacancy rates.


Note that the figures for the value of loans written are not adjusted for population growth.

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The all-important inflation figures will be released on Wednesday morning.

Market consensus for core inflation is 0.5 per cent for the quarter and just 1.6 per cent annualised, well under the 2 to 3 per cent target range.

Headline inflation could come in a bit higher, with market consensus of 0.7 per cent (from a range of 0.3 to 1 per cent).

This will be the most important domestic release of the week.

In June the annual rate of inflation was the lowest seen since 1999 at just 1.3 per cent.

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Real Estate Talk

Catch me on this week's Real Estate Talk show here (or click the image below).