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 finest 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.

Sunday, 27 April 2014

Asset classes

Economy recovers

So, the UK economy is expected to record growth this week which shows GDP of 3.2% for the year, the fastest rate of growth since 2007.

The UK economy is now only 1.8% smaller than it was at its peak before the financial crisis and the recovery looks to be well on track.

Investments 1996-2014

It's been a rollercoaster ride in Britain over the last 18 years: we've had a monumental property boom, the internet tech stock bubble and then the global financial crisis hit which clobbered most asset classes.

Interesting read today in the UK's Daily Telegraph comparing asset class returns from 1996 to 2014.

$1,000 invested in equity or government bonds in 1996 would today be worth around £3,000.

Commercial property in the UK has been a steady investment and would be worth around £3,600 today.

However, the best investment would have been property, with a cash purchased buy-to-let investment today being worth around $4,800.

When it's considered that most property investments are bought using a mortgage (buy to let mortgages were introduced in Britain in 1996), the combination or leverage and compound growth has seen property investors finish well ahead, with the £1,000 invested using a 25% deposit being worth £13,000.

"...every £1,000 invested in an average buy-to-let property bought with a 75pc loan-to-value mortgage was worth £13,048 in the final quarter of 2013, a compound annual return of 16.3pc."

That accords very much with our own experience of investing in Britain, and in fact, many of those who invested smartly around London and the south-east weren't even too much impacted by the financial crisis, with prices comfortably returning to new peaks in 2014.

It's the combination of leverage and compounding growth which has been such an effective strategy for property-owning Britons.

The report suggested that buy-to-let would continue to show superior returns to other asset classes, which may well be correct, but then since it was commissioned by a mortgage company I wouldn't pay too much heed to their future projections.

Buy-to-let borrowing in Britain has returned with great pace, booming by 44% through 2012 and 2013.