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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Wednesday, 25 September 2013

Beware of Sydney unit oversupply in some sectors

Terry Ryder of Hotspotting and I don't always sing from the same hymn-sheet, but his article on Property Observer today is spot on.

While there is a lot of talk of the Sydney housing market taking off - and I believe that it will continue to do so through 2014 - you certainly can't just buy any property in today's expensive Sydney market and expect to see a happy outcome.

In particular, Ryder highlights the risk of an oversupply of units in the Sydney Central Business District, which is often a risk of CBDs, and particularly at this stage of a property cycle when developers are becoming more active.

Perhaps even more concerning is how the mainstream media is trying to get 'ahead of the curve' by highlighting the inner south as the new hotspot to replace the inner west.

Inner west exuberance

As I've always said, the inner west has been where the key action would be since 2008 and 2009 when I was buying there myself. 

The best suburbs of the inner west have benefited from being located close to the city without the eastern suburbs price tags, and there has never been any such risk of oversupply in the key suburbs.

However, if you try to buy in the inner west today you will likely find yourself up against a dozen other investors and become involved in a dreaded bidding frenzy. 

The inner west ship has mostly now set sail and there are better alternatives in other parts of the city, particularly to the north of the coathanger.

Inner south risks

What the mainstream media has got wrong about units in the inner south is a classic mistake - confusing high levels of dwelling approvals, new developments under construction and an increasing volume of sales with what actually makes a good investment.

What makes for a good investment is very high demand and scarcity value. 

We might see some demand in the inner south, particularly from the immigrant population, but if you are buying an apartment, scarcity value will likely be...scarce.

Just as in early 2004 we saw investors suckered into paying too much for the wrong type of property (and still seeing no gains a decade on), so it might be for many who buy in certain developments in these sectors in 2014. 

Caveat emptor.