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.

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

Tuesday, 8 January 2013

Minskynomics

OK, so we keep hearing about the great Minsky Moment that will send the Australian property markets to their doom.

It is the assumed large negative cash-flow on investment properties which will be the catalyst.

Unfortunately, the theorists are overlooking that not every investor bought investment properties today, or yesterday or the day before that.  A surprisingly high percentage of properties in Australia have no mortgage debt at all against them.

Regardless, let's suppose an investor did buy a standard investment property today by, say, buying an investment unit in Brisbane for the median unit price of $360,000 using a 20% deposit.

I would consider that to be a fairly typical or average investment decision.

A standard variable interest only mortgage at 5.79% on a mortgage of $288,000 would incur annual repayments of $16,675.

An typical gross rental yield of 5.5% on a unit in Brisbane would generate rental income of approximately $20,000.

Sure, there will be some other holding costs but investors also benefit from depreciation allowances and, were the cash-flow to be at all negative, they would also benefit from some very favourable tax laws.

You can play around with the numbers a bit or argue that interest rates will head up again at some point.

But if property prices fall lower as Keen and the gloomers are suggesting then interest rates will probably follow them down. I get a strong sense that the Reserve Bank are very protective of their housing market prices.

The theorists seem to consistently overlook the reality of investing in a soft housing market - the huge negative cash-flows which will supposedly result in a stampede for the exit don't exist.