Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, 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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Monday, 7 October 2013

Is Melbourne's great property bull run finally running out of steam?

Superficially, at least, more strong auction clearance rates at the weekend.

Sydney's epic run continues with another clearance rate of 82.5%, but in truth, this was only from a small pool of auctions on Labour Day weekend. 

That said, some auction results showed signs of a very hot market with reserve prices getting smashed.

Meanwhile in Melbourne, the REIV reported a preliminary auction clearance rate of 71% from 712 auctions.

Solid enough on the face of it.

However, with 80 "no results" reported in Melbourne, it's possible that this result gets revised down below the 70% barrier which is often regarded as the notional barrier for a 'strong' market.

RP Data also recorded a result of 71% from a larger pool of auctions.

A few observations:

1) It is far too early for anyone to tell whether market prices are actually softening - the diabolical track record of so many market forecasters bears ample testimony to that (I'm talking here about dwelling prices rather than the level of housing activity).

For what it's worth, RP Data shows the following in its daily home value index (see light blue line for Melbourne), which is a rip-roaring Sydney market and far more subdued activity elsewhere:

Source: RP Data

2) It would be no surprise if Melbourne finally did slow up after a confounding run since 2007;

Dwelling Prices graph

3) In a market driven largely by speculation, news stories reporting a slowing market could at last kill momentum; 

4) Melbourne's 'fundamentals' - such as reported vacancy rates - have been less strong than elsewhere, although there has been notably strong speculative activity to date in well-located established housing stock; and

5) Although it is common to refer to stronger dwelling prices as 'improvement' is ultimately bad news for the Australian economy if dwelling prices outstrip household incomes for too long.

The RBA will be heartened that dwelling prices have firmed and shown a little growth to encourage development and construction, as well as a level of consumer confidence.

What we don't need is a return to very fast dwelling price growth while improvement in the rest of the economy lags.

Construction and manufacturing indices have shown heartening news for our economy of late, while retail sales may be in the process of recording a post-election bounce. 

Sydney's property market appears to be the problem child. After underperforming since early 2004, the Sydney market is now very active and - with a new influx of Asian buyers - looks set to continue rising for some time to come.