Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & 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's 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & '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 Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Wednesday, 22 October 2014

Sydney rents +3.2 percent (Australia +2.5 percent)

Inflation figures show rents rising in Sydney

Not a bad day for predictions as it turned out, with rental growth in Sydney 'accelerating' to 3.2 percent, but easing back in some other cities according to today's inflation figures.

Nationally rental growth increased by 0.7 percent over the quarter to be 2.5 percent higher over the past year (click charts to expand). 

The national downtrend in rental growth was cemented with declines in Brisbane (to +2.1 percent) and especially Perth (from +2.9 percent to +2.1 percent).

Rental price growth remains soft in Adelaide (+2.0 percent) and Melbourne (+1.9 percent).

In Sydney rental growth rebounded to be up by +3.2 percent over the past year, but in reality that was probably as much due to previous readings being too low as any actual acceleration. 

The zoomed in 5 year chart below shows how rental growth has softened significantly in Perth and to a lesser extent in the other large capital cities.

In the smaller capital cities, rental growth is now falling sharply in Darwin, became even weaker than it already was in Hobart (declining to +1.0 percent), and has collapsed in Canberra (-1.6 percent) to be negative and with little sign of reprieve.

Dead money or dead weight mortgages?

These trends of softening rents (at least, outside of Sydney) have given rise to a number of media articles suggesting that it may in some cases be better to rent where you live than to buy property.

This can indeed work as a personal finance strategy if you invest heavily in other assets while renting.

However, it is important to recognise that nominal rents have increased relentlessly in Australia across the full 42 years of the data series, so as a general rule homeowners have fared much better than renters.

In reality, for most people it is better to be a homeowner than a renter, since at the end of the mortgage term an unencumbered home is owned, and thus the homeowner benefits from imputed rent once the loan debt is paid down. 

The alternative is to pay rent for as long as you live, which the below data set from 1972 to 2014 suggests is likely to result in escalating rental payments over the long term.