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.

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"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'.

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Tuesday, 27 August 2013

New home loans soaring

As expected, low interest rates took a little time to bite, but now they are really impacting the market.

With returns on bank accounts so poor, investors are piling into the Aussie property market.

For most of the past year, people have been telling me why this time's going to be different. 

I've always agreed that we won't get a price boom of the same magnitude as seen previously - that always remains unlikely when the market is already relatively highly leveraged in global terms - but nevertheless, the property markets will see price gains while levels of unemployment remain reasonably low.

From SMH:

"New home loans approved by banks and other lenders jumped by 28 per cent to $79 billion in the June quarter, amid growing signs of a recovery in the residential property market.

Official figures released today put Australian lenders' total exposure to residential property at $1.13 trillion, an amount that has increased by 7.3 per cent in the year to June.

New lending, however, is expanding much more quickly than the banking sector's total exposure to property, because many borrowers are using low interest rates to pay off their debts more quickly, taking older loans off banks' books.

The Australian Prudential Regulation Authority said lenders had approved $79 billion in new loans during the June quarter, which was 28 per cent more than they approved in the previous March quarter and 20 per cent more than a year earlier.

The fastest growing category of property lending was to investors, with the value of investment loan approvals surging by 35 per cent to $27.8 billion in the quarter.

Loan approvals for owner-occupiers also grew strongly, jumping 25 per cent to $51.2 billion in the quarter, during which the Reserve Bank lowered the cash rate by 0.25 percentage points.

The jump comes as auction clearance rates in Sydney hover near record highs, re-igniting the debate about the risk of a bubble in Australian property led by speculative investors.

An economist at JP Morgan, Tom Kennedy, said lending was likely to continue flowing into property investment as the housing market recovered further.

"We've got rising house prices and falling interest rates – both of those things are quite attractive for investors. They can get better returns and they can service the debt more cheaply," he said.

The low returns from bank deposits – which can be lower than inflation once tax is taken into account – are also tipped to drive more investors into the housing market.

Despite the strong growth in new lending, the numbers suggest banks remain conservative in their credit standards.

The share of new housing approvals that are "low doc" loans has fallen to 0.7 per cent in the quarter, compared with 1.1 per cent a year earlier.

The percentage of new mortgages where the loan is worth more than 90 per cent of the property value has also fallen slightly in the past year, from 14.4 per cent to 13.4 per cent.

The APRA figures also showed banks' exposure to commercial property has increased by 2.5 per cent in the past year to $213 billion."