Pete Wargent blogspot

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

5 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's one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & 'Code Red'.

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

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Friday, 19 January 2018

NSW jobs growth on steroids

Records blown up

Wow, another big beat for employment, increasing +37,700 to a fresh high of 12,440,800. 

That makes 2017 the biggest year on record for employment growth at +403,700, with the survey recording 15 consecutive monthly gains for the first time in four decades. 

Better still, ¾ of the growth was in full-time jobs. 

Annual employment growth was the biggest ever for a calendar year, then, while in percentage terms the growth rate just rounded down to +3.3 per cent, absolutely miles above the 20-year average of +1.9 per cent. 

Female participation rose to the highest level on record, while the participation rate snapped higher to 65.7 per cent, the highest since March 2011. 

The trend unemployment rate was 5.44 per cent, the lowest since January 2013.

A terrific set of numbers, it must be said, with the Coalition now having overseen employment growth of +956,500 since coming into office. 

NSW on steroids

Queensland may see its monster employment growth rate of +4.6 per cent ease back in the coming months as a strong print or two washes through the annual data. 

Meanwhile, New South Wales employment growth has followed jobs vacancies as anticipated to create a stunning +139,700 jobs in a year, including an outrageous +150,600 since February alone!

It's pleasing to see Western Australia creating jobs again too. 

The trend unemployment rate in New South Wales continues to drop towards record lows, now at just 4.67 per cent. 

Note how things are quietly improving in South Australia too, with the unemployment rate now below 6 per cent. 

Last but not least, the trend in hours worked notched +3.6 per cent growth over the calendar year. 

The wrap

Overall, this was another great result, especially for New South Wales. 

Wages growth will start to pick up eventually, but experience overseas suggests that could take a while yet. 

5 steps to tackling loss aversion

Fear of loss is rational to a point, but it can also outweigh the will to win.

See my article here for how you can overcome it (or click the image below).

Wednesday, 17 January 2018

The dwelling supply (in 3 short parts)

Part 1- Starts & completions

One of the most misunderstood of all data releases is that of building activity, so let's see if I can shed at least a shard of light upon it, in three short parts. 

Firstly, then, the number of housing starts held firm at just under 55,000 in the September quarter.

There are still attached dwellings being kicked off aplenty, but there's been a quietly subtle shift towards more townhomes and fewer high-rise apartments lately, which is a positive move.

By the end of September the feared glut of completions still hadn't really arrived in full, and in fact the number of completions had been gently sliding for several quarters.

The obvious reason for this is the huge number of units in the pipeline, for on average apartment or multi-unit projects take longer to build than houses. 

Part 2 - Record pipeline

At the end of September 2017, there were still just under 220,000 dwellings under construction, including around 152,000 attached dwellings, which is still extremely high. 

A glut of completions likely began to hit the Sydney market in the final quarter of the year, so a spike in vacancies might be expected. Elsewhere, developers are steadily chewing their way through the pipeline. 

Sydney is seeing fewer houses built this cycle, but even so across the state there were more than 87,000 dwellings under construction at the end of September, comfortably the highest on record for any state. 

Including all commercial construction the building pipeline in Australia has never been higher, approaching a thunderous $90 billion

Part 3 - Brisbane units rebalancing

Finally the Brisbane apartment market continues to rebalance itself, with new starts slowing to a crawl. 

The trend figures present in a somewhat generous fashion here, with the original data series confirming that new starts would be a rarity by the end of the calendar year. 

Queensland also had a record high 5,678 dwellings in purgatory - being approved but not yet commenced - with quite a number of inner city apartment projects evidently stalled or mothballed. 

The wrap

Overall, expect to see Brisbane's apartment market swinging back towards equilibrium in 2018 as migration picks up from interstate and overseas. 

In Sydney, apartment completions will be running extremely high in 2018, so opportunities will present themselves for renters to snare a few bargains.

Finally, construction employment looks set to hold at or around record highs this year, both in absolute terms, and as a percentage of the workforce, with the building pipeline tracking at phenomenally high levels.

Housing finance strengthens as FHBs return

Housing finance higher

Well, it was a strong result for housing finance overall, with total commitments rising by +2.3 per cent to above $33.5 billion in seasonally adjusted terms. 

Investor loans were up +1.5 per cent in the month to $12.2 billion, but remain in a medium-term downtrend.

In original terms the total finance for all dwellings was above $37 billion only for the second time ever.  

At the state level, Victoria had the strongest trend in homebuyer commitments.

New dwelling surge

Rather than look through every number in tedious detail, let's take just a quick look at two trends in particular.

Firstly, homebuyers financed more new dwellings in November than in any month since 1978 as the new stock is absorbed domestically.

And secondly, as expected, the number of first homebuyers continued to surge up to 11,091, to sit at comfortably the highest level since the financial crisis stimulus. 

There has been a 60 per cent increase in activity in this cohort since concessionary measures were introduced in July 2017.

Indeed, if you add in first-time investors, it's possible (if not likely) that first time buyer activity is now tracking at above historic averages. 

In New South Wales, first homebuyer numbers are at the highest level since 2011, while in the other two main states first homebuyer loans are at the highest level since 2009. 

While all this has been happening, the average loan size for first homebuyers has stalled over the past year.

However, the average loan size for non-first homebuyers surged to $402,500 in November 2017, comfortably the highest monthly figure on record. 

The monthly result may prove to be a bit of an anomaly, but the trend is clearly up, perhaps representing the first signs of the latest round of macroprudential effects wearing off. 

The wrap

Overall, this was a very solid result which comfortably beat expectations, generally pointing to a solid start for housing in 2018.

That said, there will be some risks in the new dwelling sector, as a flood of supply hits the market, particularly in parts of Sydney. 

Bitcoin bursts

About a month ago we were all getting bombarded by market geniuses offering to teach us about investing in Bitcoin. 

Now down more than 41 per cent in a month. 

From hodl to sodl.

Vacancies down in 2017; but not everywhere...

Seasonal vacancies

As usual vacancy rates were higher in the month of December at 2.5 per cent or 80,092 vacancies.

Despite the record high level of building, vacancies were considerably lower than a year earlier, when there were 89,721 vacancies according to SQM Research figures.

The year-on-year decrease reflects a combination of strong population growth and a very high volume of higher-density apartments still under construction, there being a lag in the completion of this dwelling type. 

Hobart has a record low vacancy rate for any capital city of an extremely tight 0.3 per cent, while Canberra (1.3 per cent) and Adelaide (1.5 per cent) remain tight rental markets. 

Asking rents have increased strongly in Hobart and Canberra accordingly over 2017. 

Perth and Darwin also seem to have turned a corner, with vacancy rates well down from a year earlier, while Melbourne's 2.1 per cent vacancy rate was also well down from 2.4 per cent in December 2016.

This downtrend wasn't the case everywhere however, with Sydney recording a multi-year high reading of 2.6 per cent in December, up from 2.3 per cent last year. 

The numbers can jag around a bit, but smoothing the figures on a 6mMA basis gives a sense of the relative condition of the rental market in each city and the prevailing trends. 

At the end of the 2017 financial year, New South Wales had a record 64,470 attached dwellings under construction, with the overdue flood of completions doubtless accounting for the jump in December. 

Population growth in Sydney nevertheless remains strong, so it will be interesting to see how the market fares in 2018.

On that note, the latest building activity figures are due out today, and these will shed further light on completions and the pipeline remaining under construction. 

Tuesday, 16 January 2018

Consumer confidence highest since 2013

Employment drives confidence

After years of mixed or uninspiring news suddenly there's been a whole raft of positive releases all pointing to improvement. 

And it seems that for once consumers are feeling it too, with consumer confidence opening the year by rocketing to the highest level since the Joe Hockey era of November 2013.

All of the sub-components of the ANZ-Roy Morgan recorded an increase, with huge gains in both current and future financial conditions.  

It looks as though the festive spirit has carried through into 2018, although it would take a few such results to drag the 4-week average up to an equivalent multi-year high. 

The next wages data isn't due until February, but it seems these results were driven more by the improvement in the labour force and wider economy, with a further boost to come down the track as wages start to rise again. 

The consumer confidence result of 122 was well above the long run average since 1990 of 112.9.

Monday, 15 January 2018

Arrears down again

Arrears improve

Another data series suggesting that 30-60 day arrears are now very close to the lowest level on record.

First it was S&P Global that reported as such, as I charted at the attached link. 

And this time, it's Moody's.

Source: Moody's

Total 90+ day Prime RMBS arrears declined from 1.62 per cent to 1.54 per cent in the September quarter, according to Moody's Investor Service.

The main improvement was seen in shadow lenders, with delinquencies declining from 2.85 per cent to 2.59 per cent, which there was also a solid decline in non-confirming loan arrears to 3.3 per cent.

Elsewhere it was reported that loan impairment charges were also close to record lows in 2017. 

Good to see.