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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Tuesday, 27 November 2012

Australian "housing as affordable as in 1994"?

I wouldn't have thought so, but nevertheless, some good news on affordability reported in MacroBusiness article here.

The chart printed below doesn't really seem to fit with the ├╝ber-bearish MacroBusiness and its 'most obscene asset price bubble in the history of the world' weltanschau (if we want to keep up the German lingo). But why actually is the index reading this way?

The reason is explained by the methodology of the index. Specifically, the key variable is the...erm...variable rate of interest that the HIA uses:

"The discounted variable rate of all banks is used as the applicable interest rate."

So, yes, property should indeed be affordable while interest rates remain so very low (which is forecast to be the case for at least the next 18 months and beyond). However, when interest rates finally get back to a "normal" level, then affordability on this measurement index will deteroriate.

Much rests in the hands, therefore, of the Reserve Bank and its interest rate policy.

and to add a sentence to the end ' & whether the banks will pass it on" ...