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.
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Friday, 3 October 2014
AFG processes record mortgage levels
No cooling yet
Throughout the whole of 2014, commentators have been in competition to call the "slowdown" in the Sydney market, and they have continued to miss the mark.
It just hasn't really happened. Prices moved about 4 percent higher over the past quarter and, moreover, today's mortgage data released by AFG suggests something entirely different - that is, a market which is continuing to build momentum.
The manic phase of buying we saw in Q4 2013 certainly subsided over the last Christmas period, but rather than a cooling market, the number and value of mortgages has continued to build steadily through the year as the lure of capital gains continues to draw in investors.
This has culminated in a record month of mortgage sales at Australian Finance Group in September in terms of mortgages processed. Let's take a look in a little more detail.
With the obvious disclaimer that the AFG figures are only an indicator and as such are only an early warning marker for what we might expect to see from the Australian Bureau of Statistics (ABS), the largest mortgage aggregator in Australia recorded its strongest ever month in terms of loans written in September.
On a 3 month moving average basis to smooth the figures, the value of loans written has broken new heights. AFG's data is not seasonally adjusted, which accounts for much of the mid-year dip, but looks set for a strong spring and summer of unprecedented mortgage activity (while acknowledging as always that AFG may also be gaining market share).
Ultimately, there is no getting away from the fact that low interest rates are generating new interest in the housing market (click charts to expand):
In terms of the number of loans written, New South Wales is seeing record levels of activity with a 21 percent increase in the number of loans written over the past year. September was a very strong month of activity in Victoria and Queensland too.
Activity for AFG has noticeably tempered in Western Australia, while the data for South Australia is flatter than the Stuart Highway (or flatter than the Sydney Swans locker room depending on your preference for metaphors).
It's the value of mortgages written by state which is the most telling chart. Over the past year New South Wales (+21 percent), Victoria (+30 percent) and Queensland (+23 percent) all look very strong. Western Australia (+8 percent) and South Australia (+3 percent), not so much.
Average mortgage size by state shows that mortgage sizes have increased in most states, but the gradient is relatively shallow in South Australia and negative in the (highly seasonal) Northern Territory.
Finally, the percentage of investor loans remains very high in New South Wales at 49.7 percent, and in aggregate this was an all-time record month for investor activity at AFG, which will do little to quell interest from the regulators - although the percentage share of loans written to investors fell a little in Queensland and Victoria suggesting that homebuyers are also coming to the party.
In short, it looks to be a huge spring/summer selling season for Australia's property markets if AFG's data proves to be reflective of later releases by the Australian Bureau of Statistics (ABS). In particular there is little sign of the Sydney market slowing judging from this data.
Finally, the Housing Industry Association (HIA) released its new dwelling sales data for August, which recorded a bounce thanks to strong apartment sales, but volumes do look to have peaked back in April.
Mused the HIA:
"In the month of August 2014 detached house sales increased by 11.1 per cent in New South Wales and by 2.0 per cent in Western Australia. Detached house sales fell by 6.8 per cent in South Australia, 6.0 per cent in Victoria and 0.7 per cent in Queensland.
Over the three months to August 2014 detached house sales decreased in each of the surveyed states, albeit to varying degrees, with the exception of NSW where sales increased by 0.4 per cent. Sales fell by 9.8 per cent in Victoria, 4.6 per cent in Western Australia, 4.4 per cent in South Australia, and by 3.2 per cent in Queensland.