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 finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

"Pete Wargent 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'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Friday, 19 December 2014

Aussies Stop Leaving Sydney & Melbourne

Population Growth Slows

Our 2014 population forecasts were a surprise to many in that they projected a very significantly slowing in Australian population growth this year from 396,400 in 2013 to around a (conservative) 310,000 in this calendar year.

While population growth in Q1 2014 remained strong at a massive +111,600, the slowing in net immigration is now beginning to flow through to the quarterly data with growth of only +68,400 in Q2.

The second quarter of the year is traditionally a weaker period for population growth  with the data not seasonally adjusted but this is significantly less than the +92,000 we saw in Q2 2013 and commensurate with our forecasts remaining broadly on track.

Year-on-year growth over the past two quarters has already declined from +396,200 (+1.7 percent growth) to +364,900 (1.6 percent growth) and there will be further declines in that figure over the next two quarters.

This is the slowest national level of population growth we have seen since Q4 2011.

At the state level we expected to see very strong growth in New South Wales and Victoria but slowing population growth elsewhere. 

The ABS released its figures for Q2 2014 today, so let's take a look at what we can learn in 4 short parts, particularly as the trends relate to Australia's housing markets.

Part 1 - Total Population Growth

The total population of Australia increased by 68,400 in Q2 to 23,490,700, suggesting that the rate of population growth will slow in the year ahead.


On a quarterly basis growth is still higher than has historically been "normal" but the extra-strong growth of recent years is fading post-mining construction boom.


Part 2 - Population Drivers

The natural increase of the population has ticked down a little, but the real driver of change is the fall in net immigration.

We have already been witnessing this in the monthly figures for a long while, but now this is beginning to flow through to the national quarterly data.


The latest (revised) rolling annual population change figures show that the rate of population growth in 2008 was even a little higher than we believed at the time at over 2 percent per annum.

However, rate of growth has now eased all the way back to 1.6 percent.


Part 3 - Interstate Migration

Our estimates of immigration and natural increase will be close enough to the mark.

The real key to understanding population growth within Australia is to look at net interstate migration.

One of the dynamics which has helped to grease the wheels of the Sydney housing market over the decades has been an outflow of population to cheaper (and sunnier) climes.

Sydney's chronically under-supplied housing market grown accustomed to losing anywhere up to 42,000 heads from New South Wales in any given year, and usually somewhere between 10,000 and 35,000 per annum over the last few decades.

However, this is no longer happening with migration away from NSW falling to the lowest level ever recorded, with further declines to come over the next 6 months too.

At the same time net interstate migration into Victoria has increased to its highest level on record.


What's happening here? In a word - a quest for jobs (alright, that's four words).

Australians and migrants are increasingly gravitating to or around the largest two capital cities Sydney and Melbourne in search of employment as the mining construction boom wanes. They may not always find it, but clearly the mining states are seen to be a less favourable prospect at this juncture.

Adelaide has been suffering from a "brain drain" for fully a dozen years now, while the mining states of Western Australia and Queensland - which once benefited massively from interstate population flows - are no longer doing so to anything like the same extent.

Indeed Western Australia passed a small but significant milestone in the June 2014 quarter - for the first time in 11 years the state saw a net interstate outflow - OK, so it was only 33 persons, but this represents a material downward shift from previous inflows.

And while Queensland still benefits from net interstate migration (+5,753) this is the lowest figure on record for the Sunshine State.

Part 4 - State by State


Over the long run population growth in Australia has all been about the four largest states attracting ever more heads.


On a rolling annual basis, in line with our forecasts NSW is comfortably leading the way with growth of +109,100.

The mining states are also slowing as we expected with Queensland (+70,500) and Western Australia (+54,400) falling back into line.

On a percentage basis Western Australia still has the strongest growth in the nation at 2.2 percent in spite of the obvious downtrend.

The surprise package so far has been Victoria (+106,700) where growth has not slowed as much as we expected - at least, not yet.


As a result a stonking 59 percent of population growth over the last year was only in the two largest states, with the great bulk of that in Greater Sydney and Greater Melbourne.

Population growth is weak in South Australia at only 0.9 percent, and while the quarterly population count remains marginally positive (+3.200), for us there is a serious question mark around what level of growth can be sustained as the economy sheds further jobs in the lead up to 2017 as GM Holden shutters its Elizabeth plant. One assumes Santos is not hiring much either at the present time.

For different reasons both Canberra (public sector rationalisation) and Darwin (exodus of construction workers) are likely to see their housing markets in a funk in 2015, with rents declining.

Indeed population growth rates in the ACT (+1.2 percent), the Northern Territory (+1.0 percent) and Tasmania (+0.3 percent) are already looking lacklustre and remain significantly weaker than the national average.

Over the last decade the strength of the mining states has been evident.


In the current climate, we expect to see Sydney standing head and shoulders ahead of the other capital city locations in terms of population growth, while due to steadily rising rates of unemployment regional population is generally slower than that being seen in the capitals.

The Wrap

While population statistics are forever tricky to anticipate it seems likely that by the end of the calendar year population growth in Australia will have trended down close towards our forecast range.

The strongest growth still appears likely to be seen in New South Wales driven by the strength of Sydney's economy, but Victoria may yet be a surprise package.

Virtually everywhere else, the trend in population growth is down for the foreseeable future.