Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Friday, 17 October 2014

New car sales rebound across the board

New car sales rebound

New car sales are always an interesting barometer of consumer and labour market confidence.

I tracked here recently how UK car sales have soared to a 10 year high, neatly encapsulating the rebound in the British labour force, economic growth and house prices.

In that context it was good to see the latest ABS New Motor Vehicles release showing a tidy 2.9 percent increase in new car sales in September, with volumes up in New South Wales, Victoria, Queensland, Western Australia, Tasmania and the ACT, but flat in South Australia.

The increase helps to rescue a moderate down trend in rolling annual car sales which started in August 2013 driven by declining sales volumes in the mining states as the construction boom fades, including Western Australia, Queensland, South Australia and the Northern Territory, and mirrored in Tasmania and the ACT (click charts to expand);

Rise of the SUV

Sales of traditional passenger vehicles continue to decline, while the SUV continues to go from strength to strength.

Major economies dominating

Looking at the state level data on a rolling 6 monthly basis it has very much been a case of New South Wales and Victoria versus the rest, mirroring the strength of the Sydney and Melbourne property markets.

How to profit from this information?

Firstly and most obviously, don't follow the herd by buying a new car as more than 1.1 million Australians have done in the past year.

Given that almost every one of those vehicles will one day be worth $nil, that equates to tens of billions of dollars of wealth to be eroded from household balance sheets over time through depreciation, even before running costs are factored in.

Secondly, clearly it's not a great time to be investing in Australian car manufacturing or related services industries, although if you were going to do so I would probably look at SUV specialist industries!

The death of car manufacturing in Australia will hurt economies such as Adelaide and parts of regional Victoria.

I'll give you one third piece of advice for free here, though. 

Over the past 12 months for all the talk of stretched household budgets and the high cost of living Australians have bought an extraordinary 1,199,954 brand new motor vehicles, with more than 658,000 or 58.3 percent of those new vehicles sold in New South Wales and Victoria alone.

That is well over 1.1 million new cars clogging up our already woefully congested capital city roads, and Sydney and Melbourne are going to cop the brunt of that figure.

Here's my free tip: if you own properties which are located between 5 and 15 minutes by train or light rail from the centre of the large capital cities - and particularly within a few minutes walk of those transport links - a well selected property is likely to stand an excellent chance of seeing stronger capital growth than the averages over time. 

I have used this rule for nearly all of the properties I have ever bought and it has always stood me in good stead for rental growth, capital growth and with avoiding vacancies. 

People will always be keen to live close to train stations with direct capital city links.

We have seen this happen in London over the years - and it continues to happen with properties near the new Crossrail links surging in value, which is great news for our happy clients - and the same will happen in Australian capitals over time too.

And frankly, why wouldn't it? Driving to the office? No thanks!