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.

Thursday, 17 July 2014

Capital city lot prices jump +3.3% q/q (+7.5% y/y)

Land prices rising - in capital cities

Weighted median lot prices continued to rise in the March quarter as Australia's growing population continues to add more demand to the market than there is being made available supply.

Nationally the weighted median lot price increased by +2.0% in the quarter to a median of $205,248.

That is the now the highest median lot price ever recorded in Australia.

Unsurprisingly, the gain was more than totally accounted for the capital cities, where lot prices continued to increase very strongly at 3.3% q/q and 7.5% y/y.

Land prices in Sydney were noted to be a particular point of concern, where lot prices ticked up another 5.6% over the past year as a booming population growth competes for a limited supply of favourably located land. 

Source: HIA

On the other hand, lot prices in regional Australia are falling, declining by 0.7% in the March quarter.

This ties in neatly with research by the Reserve Bank of Australia, which shows that populations are increasingly becoming focused on living close to the centres of Australia's major capital cities, as that is where jobs growth is overwhelmingly now taking place.

Graph 8: Change in Job Density

Regional centres, with the possible exceptions Geelong and Newcastle are failing to attract major corporations to relocate headquarters. 

There is generally far less upwards pressure on land prices in regional centres (and I say that as someone who owns some regional properties) since there is simply more land available for release in outer locations twinned with inherently lower demand.

More than that, the trend in demographics has been conclusively proven to be towards increasing population density in the inner and middle ring capital city suburbs at the expense of Australia's regional towns.

Graph 9: Change in Population Density

The RBA's conclusion could not have been clearer on this point:

"Declining job-to-worker ratios in some of the outer areas mean that many people are likely to face longer commutes than before. 

The trade-off between space and place is getting steeper. 

Locating on the fringe is relatively less attractive than it used to be, and not only because the fringe is moving further out.

You can see that trade-off in relative housing prices over time. Inner-ring properties have become more expensive relative to outer-ring properties in recent years. And the larger the city, the greater is that premium."
The impact of lot prices and house prices, therefore, should be fairly clear cut too. And so it is.
Graph 11: House Price Gradient