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, 24 May 2012

Are Sydney's property markets tanking?

Pick the right suburbs and the right property types

Short answer: definitely not if you are investing in the right areas.

At the risk of sounding like a broken record (ahhh, too late), smart investors have been saying for years now: invest in supply-constrained suburbs of the inner-west and certain in-demand pockets of the eastern suburbs.

Here's an actual real-life example of what is happening in the inner-west - I bought the unit below in Erskineville (off-the-plan; something I wouldn't normally advocate) in 2009 for $374,950.

Erskineville is 4km and 2 stops from Central Station. An identical unit just sold for exactly $450,000.

That's exactly a 20% increase over 3 years or a 6.3% compounding annual capital growth. Interestingly, that growth rate averages out to be very close to the median growth in household incomes...

...which is what I have long argued will happen to investment grade unit values over a long-term time horizon (though I do believe that household income growth will slow a little to nearer 5% - the historic income growth has in part been facilitated by a boom in the number of two-income households).

I've seen very similar growth rates in other inner-Sydney suburbs I invest in too, in the eastern suburbs and around the harbourside, for example.

Price easing?

Could prices fall? Sure they could. But with equity in this property example of $125,000 in just 3 years, I'm not exactly quaking in my boots.

And if Sydney's population increases by 1 million - hey, that's 1,000,000 people, by the way - over the next dozen years or so, if you are investing in high-demand, supply-constrained areas, you can relax.

Vacancy rates as extremely low and rents have grown very, very strongly too - as much as 15% in the past year.

I see a similar story in the south-east of England in the UK - if you are buying properties in areas with supply shortages for 25% less than they last changed hands for in 2005 and using a 25% deposit, then your long-term risk is low.

Remember property is a long-term investment. By way of comparison the FTSE 100 in the UK dropped by 2.5% in one day yesterday.

So, no the markets certainly haven't tanked - if you know what you are doing.

Erskineville: near the train station for the City and near to Newtown - ideal for young professionals.