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.

Tuesday, 7 October 2014

Rates on hold - construction index booms to 9 year high

Rates on hold

Unsurprisingly, the Reserve Bank kept interest rates on hold at 2.50 percent for a 14th consecutive month, while continuing to anticipate a further "period of stability" ahead. 

If the RBA wanted to see a dwelling construction boom, then that it what it is getting.

AIG's PCI construction index boomed to a 9 year high reading of 59.1 up by an impressive 4.1 points in the month and way above the expansion/contraction reading of 50.

Source; AIG

A glance at the sub-indices shows that while engineering construction (i.e. mining) is in contraction mode, there was nevertheless a much better reading of 48.3 in the month (+4.6 points).

Commercial construction (58.4) expanded for a third consecutive month which was heartening to see, while apartment construction (60.5) took a bit of a chill pill from an incredibly high reading in the preceding month.

House building (61.7) also increased its reading and looks very strong, defying widespread predictions that a dwelling construction boom could not take place.

Source: AIG

Overall a pretty happy release from AIG and jolly good news for the economy although there is a sense here that the weightings for mining must be a bit off whack (it's understated).

Here is the chart which explains why I believe so - because engineering construction activity dwarfs that of all other public and private sector construction work done combined (click to expand):

Other interesting news for would-be homeowners includes remarkably cheap variable rate home loans now on offer from just 4.69 percent.

Suncorp is offering a huge discount on its variable rate products for the next few months, with 3 year fixed rates also at well under 5 percent.

Compare this with interest rates up at 17 percent as I considered recently!

It's little wonder that the cash rate has fallen no further, since in clamouring for market share the banks are doing much of the heavy lifting in the RBA's place. This makes mortgages easier yo service, pushes house prices higher (which in turn encourages construction) and increases consumer expenditure.

With the threat of consumer price inflation apparently receding interest rates look set to be hold for  some time to come.