Real-time thoughts & analysis of the markets, economy & more...
Co-founder & CEO of AllenWargent property buyers & WargentAdvisory (subscription market analysis for institutional clients).
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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).
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.
Monday, 3 March 2014
A great week or three of data ahead!
"In God we trust. All others must bring data."
The Aussie share markets are threatening to start the week by moving a shade higher as markets digest the manufacturing data out of China and mildly more positive sentiment in the US, although the Aussie dollar action is soft and fear over the situation in Ukraine look likely to weigh on the markets.
We have some exciting data to look forward to in the next few weeks!
Tomorrow the Reserve Bank meets and will confirm that the cash rate is on hold at 2.50%.
Also, this week we have Building Approvals, the National Accounts and the Retail Trade figures to carry us through the middle section of the week.
Building approvals have been one the strong data sets of late, so we'll hope to see more of the same with another strong print there.
The National Accounts are expected to confirm that the Aussie economy grew at around 2.7% in 2013 ,although there may be some risks to the downside following the weak capex data in Q4.
As for retail sales?
Well, I people watch. I people watch up to the level that is borderline acceptable without attracting undue attention or trouble.
And what I can say is that beyond the shadow of any doubt, people in Sydney are splashing around more cash around than they were this time last year - a lot more.
Low interest rates take a decent period of time to work their way through the system. Household saving rates have been at elevated levels for half a decade now and mortgage offset accounts have become increasingly popular.
If the RBA appears sanguine on dwelling prices, it is likely to be because its research and data show that Aussies are killing it on mortgage repayments, with borrowers further ahead of repayments than they ever been before.
This prudence won't go on forever, though, and, while I acknowledge that Sydney is not Australia, eventually retail sales will start to fire as home owners enjoy the huge affordability dividend that has been cast their way.
The other thing which you can't help to notice is that Sydney is the midst of a construction boom.
What else has been going on?
UK property news
Over in Britain, Nationwide confirmed that the UK property market continued to fizz along in February recording further gains of 0.6% for the month and 9.4% over the past year - see their full release here.
The index back series shows that UK prices have now been rising very strongly since the month of March 2013.
Nationwide chose to highlight in its release month the role of cash buyers, with 35% of properties bought for cash.
The index shows that prices are essentially back at their 2007 levels on a nationwide basis (-0.3% in nominal terms, which represents a fall in real terms), but have surged well ahead of previous peaks in London, up 15% in 2013 alone.
It was a far from fashionable viewpoint the time - let me tell you! - but as I noted in my first book Get a Financial Grip, prolonged downturn in London prices was quite simply not feasible.
In a mature capital city market such as London, developers becoming unwilling to develop the land they hold until the market price justifies the construction costs and the full costs of services and development.
This is basic economics, and since construction levels in 2007 were already inadequate it was a cast iron certainty to my mind that prices would not fall for a prolonged period in the capital.
The rebound in prices has seen construction pick up again in 2013 by around 10%, which has been heartening to see and is what the British economy needs to happen, but even now construction levels are 38% down on 2007 levels while the population in the south-east is growing apace.
The virtually inevitable result will be a return to frantic buying as buyers chase price upwards. The UK residential property market cycle is nothing if not repetitive.
Australia weekend auction markets
Meanwhile, back Down Under, a much busier auction market this weekend.
Solid clearance rates were recorded in Melbourne while Sydney was very strong again, recording another high preliminary clearance rate of 83% according to Australian Property Monitors (APM).
One of my themes to watch in 2014 is for my previous favourite sector the inner west to pass its peak, with the mantle being picked up by the lower north shore, which includes suburbs such as Wollstonecraft, Neutral Bay and Waverton.
Certainly the lower north is now firing along in line with my expectations, recording another blistering clearance rate of 85.1% according to APM's report.
Yet the inner west has also refused to calm down so far, recording an even higher clearance rate of 89.2%!
These auction clearance levels must surely fall as vendor expectations rise ever higher and buyers begin to chase higher prices.
APM's full report is Sydney market report is here, and notes:
"The 82.7 percent result [in Sydney] was the fifth consecutive weekend rate at or above 80 percent – an unprecedented result for this time of the year."
Concludes APM on the outlook:
"Although official rates will likely remain on hold, mortgage interest rates are falling as competition amongst banks for market share intensifies in a generally positive environment for home buyer activity in most housing markets – particularly Sydney.
February’s record breaking Sydney weekend auction market has unsurprisingly continued into March with no sign of a let up in buyer or seller enthusiasm."
I watched that Tracks movie yesterday, which, erm, tracks the 1997 journey of "camel lady" Robyn Davidson, over 1,700 miles from Alice Springs to the Indian Ocean.
I read the book years ago, so was pretty keen to see it.
Anyone who has taken the big trip around Oz - especially the Northern Territory and the stunning Western Australia - will love the stunning scenery.
I found it brilliant, and a pleasurable to change to watch a film where the storyline doesn't necessarily revolve around people being garrotted.
5/5 for me.
Made me wonder, of course, what I'm doing back in an office.