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, 14 April 2014

SQM versus the world

Auction fever

After the busiest auction weekend in Sydney's real estate market history, the "wildly bullish" Louis Christopher of SQM Research believes he has seen enough evidence to support their 2014 forecasts.

That is, to say, a Sydney property market boom in 2014 of 15-20% median price growth, and national median price growth (of which Sydney forms a key component, of course) of 7-11% growth.

As per his tweets above:  

"Our forecast made last year of 15-20% growth still holds. Only thing I can see stopping that now is new negative gearing laws or a rate rise by September. National forecast of 7-11% seems to be also coming in."

Negative gearing laws are forever an unknown, of course, although changes appear unlikely to be applied retrospectively to existing beneficiaries, rather any amendments would presumably be implemented prospectively to future property investment acquisitions.

The Reserve Bank releases its latest round of Board Minutes from its April meeting tomorrow, so that should give a clearer indication of what to expect from interest rates. 

The first rate hike still appears to be some way off at this juncture, pending confirmation of a strengthening in the labour market.

Sydney and national property markets

The good news for Sydneysiders is that the New South Wales economy now appears to be the nation's powerhouse, with the economy adding a very healthy number of jobs over the past 6 months and the unemployment rate of just 5.3% plunging to well below the national average of 5.8% seasonally adjusted.

The ultimate benchmark of SQM's predictions will be the Australian Bureau of Statistics (ABS) house price indices, but since the first quarter figures from the ABS don't fall due until a month's time, here is how the Sydney market prediction is tracking against RP Data's Daily Home Value Index (click chart).

As for the national forecast, well we're only 3.5 months into the year, of course, but the year-to-date figures are actually slightly ahead of the benchmark for 11% annualised growth.

This has largely been driven by the Sydney market itself as you can see via the correlation between the two charts (click chart).

Having briefly threatened to retrace, Sydney asking prices appear to remain robust as per SQM's Vendor Sentiment Index.

Incidentally, if you're wondering how important it is to "get it right" as a property investor, check out what has happened to the 3 year asking prices for 1 bedroom apartments (+35%) and 2 bedroom apartments (+47%) in Sydney's inner west.

I'm currently in the process of refinancing a number of Sydney investment properties and both of SQM's figures above for 1 and 2 bedroom inner west apartments have proven to be almost scarily accurate.

As indeed, I can also attest, have their significantly more moderate 3 year growth figures recorded for apartments in the eastern suburbs.

An asking price index for a region can only ever be an indicator, but based on the evidence I've seen, they can be a mightily useful tool when considered over a meaningful time horizon.