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.

Sunday, 9 November 2014

4 data sets we'll be analysing with interest this week

Auction weekend

A popular weekend of property auctions in Sydney saw preliminary auction clearance rates "plunging" to 75.5 percent (APM) or remaining "solid" at 73.59 percent (RP Data), depending on your preferred data source and point of view.

APM went on to report "steep declines in clearance rates" for Sydney and Melbourne.

More sceptical observers will doubtless conclude that this is a calculated attempt to delay market intervention in the guise of macroprudential measures or interest rate hikes.

A browse through the results reported to date reveals a string of enormous sales in suburbs such as Surry Hills and Hurstville, where everything that is touched continues to turn to sold, yet a solid smattering of detached houses passed in at Pymble on the upper north.

This is perhaps a slightly-too-neat microcosm for a couple of previously highlighted broader market trends including, to be blunt, the prominent role of Chinese capital.

There is little doubt that auction clearance rates can and probably will slide as vendor expectations become ever more lofty, but with a median reported auction sales price on the day of $1,087,500, a glance back through our chart packs over the past year suggests that it would be drawing a fairly long bow to argue that the Sydney market has cooled substantially.

In any case, further related to the housing market theme, the week ahead is an absolutely humdinger for statistical releases, which will allow us to make a few more informed assessments on how the housing market and the economy is tracking.

Here are four data releases from the ABS we will be analysing with interest here in the few days ahead.

1 - Housing Finance (Monday)

The Housing Finance data is one of our favourite releases due to its wide scope and the manner in which it sheds a good deal of light on what is happening at the state level in terms of major renovations, construction finance, investment lending and total transactional activity.

The August release suggested that owner occupier loans may gradually be rolling over, and perhaps the main point of interest this month will be whether financing for investment housing is continuing to rise at a faster clip than owner-occupier lending.

At the state level, we mused here recently that the owner-occupier loans data could finally be indicative that a Brisbane housing market recovery is "in the bag". 

Owner-occupier loans in Queensland have now been confirmed as having rebounded strongly since Q1 2011, so this is one data set that we'll be scrutinising with additional interest.

2 - Dwelling Price Indexes (Tuesday)

Related to the Housing Finance figures, on Tuesday we will see the release of the ABS Residential Property Price Indexes for the September 2014 quarter.

The Q2 2014 data revealed Sydney dwelling prices to be rising at a pace of above 15 percent per annum, as was accurately anticipated by SQM Research back in 2013, so dwelling prices in the harbour city will attract further scrutiny this quarter.

Concerns about the pace of price growth may appear unusual given that Sydney has been the weakest performer of all of the capital cities across the history of the data series.

In truth, however, the data series only runs from September 2003 thereby almost perfectly clipping off the preceding Sydney property boom. 

In other words, Sydney's index originates from a comparatively high base and as such Reserve Bank economists and market regulators will look on with caution.

3 - Wage Price Index (Wednesday)

In a country with a prescribed inflation target of 2 to 3 percent, you would be forgiving for thinking that a wage price index tracking at slightly above the mid-point of that range would attract little heed.

In reality, the headline figures, as they so often do, disguise a somewhat different picture below the surface, which we'll take a look at in more detail on Wednesday.

In particular alert observers may look concurrently at the chart above for dwelling prices and note an apparent disconnect between the pace of housing market growth in Sydney and Melbourne and that recorded lately in the wage price index.

As is stands the annual rate of wages growth is tracking at a low watermark in historical terms for this data series, the mining construction boom being one of the key factors which juiced wages growth over the past decade.

With engineering construction flipping into reverse gear, unemployment rising steadily and inherent slack in the labour market, wages growth appears likely to remain only slightly ahead of the headline rate of inflation.

We'll analyse wage price indices by state and by sector in some detail in the middle of the week.

4 - Lending Finance (Wednesday)

Also on Wednesday we will be taking a look at Lending Finance figures.

The August release revealed an awkward retracement in commercial lending after a previously promising run.

This data series has taken on an additional level of regard from a financial stability perspective in recent months, since buried within the commercial lending data is a state level split of loans written for investment housing.

Over the past two years, property investor loans in New South Wales (i.e. Sydney) have taken on a gradient even steeper than that seen during the preceding market boom just over a decade ago, reflective of continued heat in the Sydney housing market.

Given that the state has very strong population growth (well over a million extra persons since the turn of the century, or a 17 percent growth in total headcount), and given the popularity of real estate as an investment choice for Mum-and-Dad investors, we might indeed expect to see a chart of rolling annual gross lending values running materially higher over time as dwelling prices rise.

Question marks arise here since in this cycle as compared to the last investors in Sydney are enjoying cheaper credit thanks to lower borrowing rates and, largely thanks to the rollicking rate of population growth in Greater Sydney, vacancy rates have remained considerably through this market cycle too, keeping rental growth robust.

As such, this release will be examined for any indications of a slowdown in investor loans in New South Wales. 

The longer the boom trend continues, the greater the likelihood of meaningful macroprudential measures and property market intervention from regulators (APRA). 

The Wrap

The further exciting news is that we've only scratched the surface here, with a veritable slew of other interesting data coming our way through the week ahead. 

The first two weeks of the month are always the boss for macroeconomic news in Australia, and this week will be one of the more interesting of its like, so stay tuned!