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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Thursday, 24 October 2013

Sydney house prices +4.2% in September quarter

Reports SMH:

"In the September quarter the median house price jumped 4.2 per cent to  $722,718. 

‘‘Sydney is ... head and shoulders above the rest,’’  Australian Property Monitors senior economist Andrew Wilson said. 

‘‘We are in uncharted territory now.’’ 

Apartment prices in the harbour city have also skyrocketed, APM quarterly data shows. 

The median price surpassed $500,000 for the first time, growing 3.3 per cent to $515,035."

This is bad news for first homebuyers and also for those who have been campaigning hard for some years for a 'strike' against buying housing, as Dr. Andrew Wilson of APM notes:

"While it is further grim news for first home buyers, Dr Wilson said those who bought 18 months ago had done well. ‘‘House prices are now $90,000 more expensive than they were at the start of 2012,’’ he said. ‘‘And apartment prices are nearly $65,000 higher.’’
Adelaide and Perth house prices were reported as flat in the quarter.

Meanwhile, prices in Canberra fell (refer to the Canberra chapter in my book for why this was an easily identifiable risk: falling public sector employment is reducing demand in the ACT).
It's true that Sydney is "uncharted territory" insomuch as prices have continued to all-time highs as I and many others have long expected.
But only insofar as, say, GDP moves into "uncharted territory" every single year in Australia - it's pretty much what you'd expect in an economy with an inflation target.

Annoyingly, at 36, my age has also now surged into uncharted territory, as have average Sydneysider earnings and, for that matter, the extortionate price of a schooner at Ryans Bar at $10.70 (forget ten pound Poms, this summer will see the first ten dollar schooner Poms).

The obvious underlying point here is that while affordability waxes and wanes, over time prices will break new highs.
The present cycle in Sydney looks to have some way to run yet before affordability constraints eventually reign the market in just as they did in early 2004.

When it comes to favoured locations in real estate, people tend to spend whatever they can afford to buy (and then some) until the rubber band can be stretched no further.

RP Data's home value index now has Sydney's home prices up by $64,210 or 9.9% in the last 137 days - that's $468 per day.

Source: RP Data

In secondary locations which by there very nature are in lower demand, other factors can bite harder, especially in a downturn.
Cycles do broadly tend to repeat although the specifics tend to differ.
There is a huge proportion of investor capital this time around, with around 50% of housing finance being for the investor class of late.
As usual other sources go on to cite Chinese buyers as a major influence on house prices, although few actual statistics are available as evidence.

Expect to see an all-too-predictable witch-hunt in the coming days as news stories highlight the role of Asian buyers, many of whom, of course, are as Australian as you or I, but have a different skin colour.
Another thing that is different this time around is that the city is denser, with the population of the city continuing to grow very rapidly each year.

There is some better news for buyers, however, and that is that more previously reluctant sellers are coming to the fore aiming to capitalise on stronger market conditions.

With so many auctions taking place on Saturday mornings in the popular suburbs and potential bidders only able to be in one place at once, more opportunities to avoid the dreaded bidding frenzy should open up.

Vendors do need to be realistic in their expectations, however.

Some have been reading the "property boom" headlines and are destined to be disappointed when their lofty reserve prices remain unmet by buyers who have done their due diligence on comparable sales.