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.

Wednesday, 2 April 2014

Nationwide: London prices +18% y/y

People often ask me why I choose to own well-located Sydney properties rather than those in regional centres, mining towns or other higher-yielding choices.

Yes, I get it, the rental yields might save you a few bucks a week. But I don't need a few bucks a week, and at what cost do those few dollars come anyway?

Well, this post should explain my thoughts and experiences a little.

Nationwide released its house price index for March today with average UK house prices up by 9.5% y/y.

Source: Nationwide

Happy days and all good for owners in the Old Dart then?

No. Not at all. Not even close.

To say that the last decade has been a multi-speed market, would be the understatement of the...uh...decade.

London property prices - another city which I invest in, by the way - were recorded as being up by a stonking 18% y/y, taking the median price to now double that of the rest of Britain.

Source: Nationwide

Knight Frank reported yesterday that London prices are up by 68% over the last 5 years as foreign capital continues to pump the market.

Essentially, for those of us who stuck to fundamental common sense of looking at a huge and growing aggregate demand for real estate versus a diabolical and artificially constrained supply, then the market has been very kind for year after year after year over the past two decades.

There is certainly no fun to be had for buyers in London at the moment, though.

We have seen vendors pulling out 24 hours before exchange in order to seek higher prices, widespread use of gazumping, underhand tactics during sealed bid processes...and basically every other hallmark of a market frenzy you can imagine in recent months.

Everything is now stacked in favour of property owners from low interest rates to low vacancy rates to booming demand.

The London market has become completely suffocated by its lack of quality supply and prices just keep on going up...and up.

Two speed

It's far rosy for owners in the rest Britain, though.

In fact, most parts of Britain have had a miserable 7 years of bad luck (although it's not really luck).

Only two other regions are above the level they were at 7 years ago in 2007, and one of those was the south-east (another area I invest in) due to its commutable proximity to the City area of London and the associated ripple effect.

The other was the Outer Met itself!

Source: Nationwide

Everywhere else remains below 2007 levels and way (waaaay) down in inflation-adjusted terms, given the pace which CPI was galloping along at until very recently, which was above 5% for a time.

I can only wonder what became of the seminar groups which even as late as 2007 were strongly advising unwitting attendees in no uncertain terms to use 100% mortgages to buy property in the higher yielding areas.

The mind boggles. A truly desperate outcome.

House prices in Northern Ireland are an incredible 49% below where they were in 2007, and certain parts of England have fared little better.

Think very carefully about the implications of all that when mentoring programs advise you to buy in a mining towns, or in too-good-to-be-true cheap regional properties, or in one-industry regional centres.

No free lunches.