Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

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 better 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.

Invest in Sydney/Brisbane property markets, or for media/public speaking requests, email pete@allenwargent.com

Sunday, 15 March 2015

Adelaide's mendicant economy

Adelaide not fulfilling its endless potential

I love Adelaide.

Beautiful city, top people, great lifestyle and the capital city of a resources rich state with almost limitless potential.

I've worked in South Australia in the past in the resources industry, and nothing would give me greater pleasure than to relocate down there and work as a buyers agent.

My main competitive advantage, after all, is that I can relocate to buy in locations which are set to strong record capital growth (and therefore I'm not bound to that famed industry mantra that "it's always a good time to buy").

I haven't relocated to Adelaide though, because at present there simply isn't the growth or dynamism in the local economy to sustain strong capital growth.

"Beggar state"

In recent years the only impetus in the local economy has been coming from public sector wages growth, which I believe is a dangerous game to play for property investors.

I'm not an advocate of investing in mendicant economies such as Adelaide's economy is at the present time, or locations such as Canberra where bureaucracy effectively is the economy and the potential for land release forever looms  as a threat which could cripple the over-priced housing market.

Similarly I'm not buying in Perth at the moment since the economy has moved into a downturn phase as the mining investment boom unwinds, though the Perth property market's time will eventually come again in the years ahead.

Sure there has been plenty of spruiking of an imminent property boom in Adelaide for at least six or seven years, but - although it has made me many more enemies than it has friends - a long-running theme of this blog has been that the local economy has remained far too weak to sustain such a boom.

The problem with so much property market commentary is that it comes from the point of vested interest and therefore when a city or region within a city has an economy which is weak - and I assume here that commentators do actually look at the economy as they claim to - the facts are glossed over.

Employment growth in reverse

Take last week's jobs report, for example, which I looked at here.

No employment growth in South Australia now for more than half a decade.


Correction - negative employment growth over more than half a decade.


The number of persons recorded as unemployed in South Australia up by 35 percent since January 2012 to the highest level this century.


Highest unemployment rate in the country.


Slow population growth.


And so on. 

As I have been arguing for years, if South Australia can kick off a Woomera or another major project - even an Olympic Dam expansion, although that seems unlikely for now given the depressed state of Dr. Copper and other commodity prices - then there may be some opportunities for growth.


No-go zones?

But I can't see how public sector wages growth offers a compelling case for property investment.

Local Adelaide property expert Peter Koulizos adds a couple of places to avoid within the city of Adelaide:

"Peter Koulizos’ places to avoid:

"DAVOREN PARK: It is on the edge of the metropolitan area and has a mixture of low-quality housing and high supply of new houses. 
Its future capital growth is limited because of the impending closure of the nearby Holden manufacturing plant.
ELIZABETH: The suburb is a relatively long way from the Adelaide CBD with a significant proportion of low-quality housing. 
Capital growth will be restricted in the foreseeable future also because of the closure of the Holden manufacturing plant in 2017."
I haven't been down that way for a while, but the reported unemployment statistics tumbling out of the region are alarming.

Meanwhile house prices have slumped over the past five years - see here, here, here and here, for example.
Jest kills Kenny 

Even Adelaide Now is now getting with the programme, via the effervescent Chris Kenny:

"In the early stages of last week’s controversy about governments subsidising remote indigenous communities a Sydney television presenter made a telling jibe.

“Well, we still subsidise South Australia don’t we,” she laughed.

Not funny, Janine.

SA has now joined Tasmania as a running joke in the national economy — a place reliant on the rest of the nation to pay its way.

For a long while the news has been all bad — the Olympic Dam expansion burst, Holden slipped into reverse and now the submarines seem sunk.

The graph on the front page of The Advertiser last Monday told a shocking story.

Measuring jobs growth — the heartbeat of an economy — it was like a heart monitor in a hospital with four states showing strong signs of life and SA and Tasmania flat-lining at the bottom.

Jobless figures later in the week showed SA still had the highest rate in the nation — even higher than Tasmania.

The statistics revealed that over the past 5 years the number of people employed in the state has actually gone backwards.

This is a tragedy and it could get worse.

These two high taxing, high spending, high welfare dependent states have become openly beggar states.

For decades SA has seen an economic version of Waiting for Godot — where we have all waited for a big economic project to save us like Monarto, the Multi-function Polis, the Olympic Dam expansion or a transformative subs deal."

Looks like someone or other has been reading my blog given the quoting of identical statistics.

Either way, it's a neat summation of the problem.