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, 21 July 2014

Robust inner Sydney rental growth

Renting versus buying

One of the factors which can begin to put downward pressure on dwelling prices is when renting property becomes comparatively more attractive than buying it.

A few commentators dropped the ball this week when the Reserve Bank released a conveniently-timed research paper discussing just that point: whether folk may sometimes be better to rent property than buy it in the absence of accelerating dwelling price growth.

In doing so pundits perhaps missed the underlying point that the Reserve Banks is likely attempting to jawbone some speculative heat out of the market ahead of a now likely further interest rate cut.

Futures markets are seeing a rate cut to just 2.25% as increasingly likely, and, frankly, so am I.

Rents and prices rising

The stark reality for Sydneysiders over the past half decade is that life has been easier for property owners because while dwelling prices in the inner suburbs have been rising strongly, so too have rents.

As the RBA itself noted recently, the inner and middle ring suburbs are adding jobs and are seeing population growth rates well in excess of the state average...and New South Wales is also now adding the greatest number of heads per annum, notching up a massive +110,300 in 2013.

Over the past year, while pockets always exist where rents have overshot and are now falling back into line, rents in many inner suburb locations are continuing to rise well ahead of income growth and the inflation rate.

This is true both for inner Sydney units and apartments...(click chart)...


...and for inner Sydney houses (click chart):


The rental growth, like price growth, has largely been focused on suburbs closer to the Central Business District.

The RBA's research showed that a near identical trend has played out across every capital city over the past decade.

Renting has not become comparatively more attractive than owning over the past five years or so as borrowing rates continue to decline, dwelling prices are rising and so too are median rents.

In the inner suburbs of Sydney in particular, there is continuing upwards pressure on the housing market.

And, for the reasons noted by the Reserve Bank in their detailed research, this is set to continue due to dramatic demographic shifts towards inner city living.