Pete Wargent blogspot
Co-founder & CEO of AllenWargent property advisory, 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 New York Times bestsellers 'End Game' and 'Code Red'.
"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.
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Thursday, 30 March 2017
Capital city expansion
In percentage terms the resources capitals of Perth and Darwin have seen their population growth rates decline very significantly since FY2014, while many mining areas have slowed in sympathy.
Greater Melbourne is now top of the tree by far with a blistering population growth rate of 2.4 per cent, followed by Greater Brisbane (1.8 per cent), and then Greater Sydney (1.7 per cent).
A weakened economy in Adelaide has seen its population growth rate continue to slide to 0.7 per cent as disenchanted residents drift interstate to Victoria, while Hobart has a population growth rate of 0.8 per cent.
Interestingly we are now seeing flat or negative population growth across the regional areas of a number of states, with the population actually in moderate decline in regional Western Australia, regional South Australia, and the Northern Territory outback.
In absolute terms Melbourne shot the lights out in FY2016 in recording massive population growth of 107,770, comfortably eclipsing the 82,797 increase in the Greater Sydney population.
Between them the two largest capitals accounted for more than 190,500 or some 56 per cent of total population growth.
Population growth in Brisbane is also picking up the pace again as folks drift north from pricey and crowded Sydney, rising steadily to 41,135 in the financial year.
I've long felt that to some extent south-east Queensland will over time become seem as one long conurbation stretching from Noosa to the Tweed.
The latest ABS population density grid below hints at what I mean by that:
Overall population growth become even more focused on the two largest capital cities in FY2016.
Away from the capital cities total regional population growth around the country was just 61,167, with Gold Coast (12,280), Sunshine Coast (5,967), and Geelong (6,776) pitching in a fair chunk of this growth, and the Hunter Valley a fair amount of the remainder.
But the real action has been in Greater Melbourne where population growth has all but torn the roof off to surpass 4.6 million.
Meanwhile, the population of Greater Sydney increased past 5 million in the month of June 2016.
The ABS noted that it took Sydney nearly 30 years to increase from 3 million to 4 million between 1971 and 2000, but the harbour city has added its latest million in about half the time.
Job vacancies rise
Good local news today as job vacancies rose by 9.4 per cent over the year to February 2017 in trend terms to a total of 186,400.
That's the highest result since all the way back in 2011, and suggests solid jobs growth ahead.
The number of unemployed persons per jobs vacancy is now back below 4 and at its lowest level since 2012, though there is literally more work to be done here.
The vacancies figures still have a Sydney-Melbourne flavour to them, in line with most other economic and demographic trends we're seeing right now.
Well over 20,000 of the vacancies each were to be found in the healthcare and social assistance sector and the professional, scientific, and technical industries respectively.
Meanwhile manufacturing, mining, and construction have all picked themselves up of the mat lately.
Sydney's labour force has previously been on a blistering run, with total employment across the state growing by a walloping 4.4 per cent in trend terms over the calendar year 2015.
This was not sustainable, and employment growth has now slowed to a crawl.
Victoria (and particularly Melbourne) has now taken up the mantle, with employment growth peaking at 3.8 per cent in trend terms in October 2016.
In truth, there's not been too much happening elsewhere...
When looking at the actual number of net new jobs created we see that Melbourne and Victoria have created...well, nearly all of the net growth in employment over the past year.
There is a veritable slew of new data out today, so there's plenty to look at, including among other things new figures on migration and regional population growth for 2016.
I expect to see regional population growth having slowed further, with capital cities accounting for a near-record share of population growth.
Moreover, we can expect to see the strength in Victoria's labour market sucking more people in to Greater Melbourne.
Wednesday, 29 March 2017
Declines set to slow
Some 4½ years after the heady 2012 peak it looks as though the drop in resources construction will at long last be drawing to an end.
Private sector engineering fell further in the fourth quarter of calendar year 2016, to be a thumping 29 per cent lower over the year.
Thankfully, there was a 9 per cent uplift in public sector construction, helping to offset the decline somewhat.
Construction activity in Western Australia continued to tumble from $12.6 billion in the June 2015 quarter to under $5 billion over the last quarter of 2016, but elsewhere activity has long since already flattened.
Western Australia doesn't have too much further to decline, which is one plus point.
But the real reason we should expect the end of the decline to be soon upon is that there is now more work getting underway, as highways and infrastructure are built, and as the reserves of existing resources projects are depleted, thereby requiring further investment.
2017 should therefore see the last of the declines in engineering construction.
Mathematically, this is hugely important for the economy, for once mining construction is no longer acting as a drag on growth, we should find that the remainder of the economy is growing at a reasonable pace.
Although there have been many challenges along the way, that Australia has avoided a technical recession over more than 25 years through the boom and bust is quite a testimony to the self-correcting forces in the economy.
Windfall for New South Wales
Stamp duty isn't a much admired tax.
Except by governments that is!
The arguments against stamp and transfer duties include that they discourage labour force mobility, while making life challenging for first home buyers.
It's not hard to see why governments like them, though.
Over the year to February 2017 the NSW Office of State Revenue (OSR) alone recorded astronomical receipts of $9.4 billion.
Stamp duty is now accounting for more than a quarter of state government revenue in NSW.
I noted last year how the NSW government has smashed its budget targets to leave itself with net debt of less than zero for the first time, largely thanks to this remarkable windfall.
A proposed alternative would be to put an annual tax on the unimproved value of residential land, including for the family home (there is already a land tax threshold in place, but it doesn't capture all homeowners due to an exemption on the family home).
The main challenge is that with residential land values in New South Wales of $1,657 billion, the annual tax would have to be quite significant to raise the equivalent $9.4 billion.
Recent proposals have included an annual land tax of 0.75 per cent.
There are now just over 3 million dwellings in New South Wales, so another way to look at it is that households and owners of other residential dwellings may have to stump up on average $3,100 per annum to raise the equivalent amount of tax.
A proposed land value tax would typically deliver comparatively little pain for those living in an apartment, since the land value content of such dwellings is relatively low.
On the other hand I think of the retirees on my street who now have very valuable land under their homes, for which the annual land tax bill would be impossible for them to pay.
So the argument goes, by taxing people on their homes they will be 'incentivised' to move somewhere smaller and more appropriate for their needs.
It could certainly happen over time, though it would be a brave move politically.
Tuesday, 28 March 2017
Nice to see the media warming to one of my long-running blog themes.
While the median apartment price in Sydney has increased by 49 per cent since August 2012, for Chinese buyers the price has increased by just under 21 per cent.
And this while prices in some Chinese cities have exploded higher.
This simple chart helps to explain why Chinese money continues to pour into Australian real estate.
That said, it looks as though the Aussie dollar may have turned a bit of a corner against the Chinese yuan.
Recent studies have concluded that Chinese buyers have been very prominent in Australia's main capital city markets.
Not that this could be much of a surprise to anyone actually active in those markets.
Even the official figures from the Foreign Investment Review Board showed that approvals had tripled in only two years.
I analysed these official data in more detail here.
A veritable 'great wall' of money, you might say.
Monday, 27 March 2017
SQM Research provides some great housing market statistics.
Here is something few would have dared to predict - vacancy rates in Melbourne, getting progressively tighter and tighter every year since 2011.
Still heaps under construction, of course, but still the oversupply risk appears to have dissipated, at least for the time being.
Source: SQM Research
The extent to which offshore investors have left apartments vacant is up for debate.
No doubting the main driver, though - unprecedented and sustained population growth.