Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 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 finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete 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'.

"The level of detail in Pete's work is superlative across all of Australia's housing markets" - Grant Williams, co-founder RealVision - where world class experts share their thoughts on economics & finance - & author of Things That Make You Go of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Thursday, 2 January 2014

7 reasons to be positive in 2014

We know that mining capital investment will at long last start to fall in 2014, which will likely see a period of slightly higher unemployment as engineers and contractors seek new ventures. This has led many to believe that Australia is heading for a recession.

Source: ABS

However, here are 7 reasons to be optimistic about 2014.

1. Exports are soaring

As the new mines move from construction into production, booming export volumes will begin to offset the fall in mining investment very nicely.

Bulk Commodity Exports graph

2. The lower dollar is helping

Another of the great fears was that commodity prices would collapse from their tremendous peak.

Graph: RBA Index of Commodity Prices

On the face of it, commodity prices have struggled in 2013 - the index fell by 4% in 2013 in the Reserve Bank's chart above, which is in SDR terms (a reserve currency). However, the good news is that since the RBA's rate cuts (and jawboning) have brought the dollar down nicely by some 15%, in Aussie dollar terms the commodity prices index increased by some 11.7% in the past twelve months.

3. Rising share prices

The lower dollar will help our share markets too, and we've already had an outstanding run. The high dollar has stymied returns a little to date as it has discouraged foreign investors, but this won't be such a constraint in 2014, and thus almost everyone is seemingly forecasting gains in the market this year. 

Forecasting share markets is a fool's errand, but 10% gains next year might be a reasonable guess (probably with a sharp correction somewhere along the line) lifting Australian household wealth even higher than it already is.

Source: ASX

4. Rising house prices

Unusually, 2014 is the first time in years that no credible forecaster is suggesting that house prices will fall next year. AMP forecast 8% growth nationwide. Others suggest 10%, and some closer to 5%. But it's quite unusual that nobody is forecasting falling prices in Australia.

However, this plays out it has been a remarkable about face from 2012 when bearish commentators were talking about thousands being bankrupted by an unprecedented property bust. I suppose they could have been more wrong, but it's hard to imagine how - Sydney dwelling prices are up almost 20% since the trough, with prices rebounding everywhere else as well (not very much in the regions, it must be said). 

It will be interesting to see how far dwelling prices are allowed to run before the Reserve Bank pulls a lever.

Dwelling Prices graph

5. Retail sales to rebound

Low interest rates and higher house prices will lead to an increase in consumer confidence and a rebound in retail sales. It's likely already underway, with signs of life in the ABS retail figures in recent months. Households are benefiting from much lower mortgage repayments and the savings will find their way into the shops in 2014, stimulating the economy further.

6. Housing construction to take off

Slowly but surely dwelling construction will start to take off, following a very large increase in building approvals over the past 18 months.

Graph: Dwelling units approved

Source: ABS

7. Being negative is boring

OK, I can't think of a 7th reason off the top of my head. It will certainly be interesting to see what happens to market commentary if the economy starts accelerating, though.