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, 10 July 2014

Sydney unit rents surge to new record high (+5.3% y/y)

Apartment rents climbing

Some years ago I suggested that there would come a time when the median cost of renting a unit in Sydney could even become higher than the median cost of renting a house.

That's in part because of the respective locations of the property types, in part due to affordability, and partly representative of a shift towards medium-density dwelling types.

We aren't quite there yet, but we're now getting pretty close.

Noting the obvious caveat that these are median figures and rents have clearly not risen in a uniform manner everywhere, over the past half decade, depending on your preferred index, the median cost of renting an apartment in Sydney has risen by 15-20pc.

The Australian Financial Review reported today here that the median unit rent in Sydney as recorded by Australian Property Monitors (APM) has surged by +5.3pc y/y to a $500 median weekly asking rent, while the equivalent figure for Sydney houses is now only a fraction higher at $510 per week.

Dr. Andrew Wilson of APM noted: "At  the moment in Sydney, it's all good. Unless you're a tenant."

However, rents have certainly not been increasing everywhere in Australia. Reports the AFR:

"The biggest declines were in Perth, where unit yields fell almost 9 per cent and 5.8 per cent for houses in the past year. 

Canberra recorded similar yield softening. Asking rents for both houses and units in Perth and Canberra fell about 6 per cent...

...Perth’s market was still adjusting after a period of unsustainable growth last year. Canberra's declines represent a broader depression in the  housing market."

Part of the ACT were called out as a positive cashflow hotspot in 2012, but  this year will almost certainly see negative capital growth and plummeting rents too. 

That's why if you are going to invest in property, I recommend larger cities with a guaranteed strong population growth and labour market growth. 

The rising household debt tide can float all boats, but if jobs aren't being added on a net basis over time and  ifpopulation growth remains stagnant, that can begin to spell trouble for housing markets. 

It's not likely to be a good time for Canberra property with labour market cutbacks, which shows why it's rarely a good idea to invest in a market which so heavily reliant on one 'industry' (in this instance, public sector roles).

Dwelling prices 2014 - Sydney

In terms of dwelling prices YTD, our forecast of +6pc to +9pc for calendar year capital growth in Sydney may look at this juncture to be a little under-cooked, but personally I doubt it will be too far off the mark when all is said and done come 31 December 2014.

We've benchmarked our forecasts for the YTD here below against RP Data's Daily Home Value Index, which has shown itself to be seasonal and perhaps should not to be taken too literally (click chart):

Sydney's property and auction markets appears to have left the mania phase we were experiencing in November and December 2013, and sentiment has calmed somewhat.

But with variable mortgage products even now available with a '4 handle', it seems likely that dwelling prices will be higher again by the end of the year.

We have carried out a similar review of our forecasts for the other capital cities over H1 which you can read here