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.

Friday, 7 March 2014

Sydney property prices in 2014 -- appreciate by 15-20% or slow down?

SQM bullish on Sydney

There was quite a lot of debate in the early weeks of the year about whether Sydney's property market would storm ahead or slow down.

SQM Research's 2014 property market forecasts caused quite a stir when released last year.

Since rates have neither been slashed in recent months nor hiked, SQM's 'base case' or Scenario 1 is the prediction in play, and that is for Sydney prices to boom by 15-20%

It's too early to call a strong economic recovery. 

If we did then the prediction would be 20-30% growth in 2014, but the latest data has not yet been strong enough from the labour market and therefore no interest rate hikes appear imminent.

The question is, will the 15-20% growth scenario be correct, or will the market slow down? 

We're about to enter the second week of March, so let's take a look how things are tracking for the year-to date.

Source: SQM

The demand side of the property markets has remained imperiously strong. 

Housing loan approvals are approaching record heights, investors are running wild and Australian Property Monitors has been consistently reporting auction clearance rates of above 80%, and closer to 90% in the hot sectors of the market.

As noted, interest rates are locked down at historic lows, and as the major banks continue to compete for market share, 2 year fixed rates have fallen to only 4.84%. 

It's unclear how long that will last but that is a stimulatory level of credit.

Housing Loan Approvals graph

Low interest rates have clearly caused demand to rip. 

Houses in Sydney are selling in around just a month, and apartments in just a few weeks, and this gauge has been falling still.

Source: RP Data

Demand is clearly still incredibly high. But what about supply?

SQM's own figures showed Sydney's stock on market hitting the lowest levels on record two months ago before bouncing a little. 

Even so, stock levels are horribly low in Sydney at just 22,715 (compare them to Melbourne at 42,454) and remain down 16.1% on last year.


Source: SQM Research

To give the supply figures some more context, Tim Lawless of RP Data has produced an excellent series of charts, which serve to highlight Sydney's supply problem.


Capital cities

Source RP Data

Very messy-looking for Sydney. 

Compare Sydney to other regions in Australia, for example, as RP Data does for both houses and units below:

All regions graph HOUSES

Source: RP Data


All regions graph UNITS

Source: RP Data



So, to sum up, will Sydney prices rise by 15-20% in 2014? 

Well, it was always going be too early to say "yes", but equally, the indicators also all say to me that it's definitely too early to say "no".

Home values in the first 66 days of the year are up by $17,350 according to RP Data's Daily Home Value Index, which equates to around 2.4%. 

Only a complete mug would annualise 66 days of here you go: that's travelling at a shade over 13% annualised pace.

One issue to keep an eye on is asking prices - in the last few weeks, there has been perhaps an indication that asking prices in Sydney may be this space.

Verdict: it's too early to write off SQM's predictions just yet. 

And to sign off, here are the daily home values figures dropped into a chart for Sydney:

Source: RP Data