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 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.

Tuesday, 3 March 2015

Building approvals smash record high

Record high approvals

The ABS released its Building Approvals data today and records tumbled all over the place.

A massive 19,282 dwelling units were approved in January 2015 taking the rolling annual number of approvals to an all-time record high total of 203,182 on a seasonally adjusted basis.

The residential construction boom is alive and well.

In particular the boom is being driven by a huge uplift in approvals of attached dwellings rather than houses.



If the Reserve Bank of Australia wanted to see a boom in residential construction work done, then it is now surely in the pipeline.

The rolling annual value of residential building jobs approved surged to a new record high of more than $60 billion on a rolling annual basis, with an all-time record of $5.8 billion of residential building jobs approved in the month of January alone.



The main beneficiaries of the residential building boom will be the respective economies of Melbourne, Sydney, Brisbane and Perth in that order.



The corollary to this is that some markets may now experience an the supply of attached dwellings getting ahead of the rental demand.

House and unit approvals by city

In Greater Melbourne the rolling annual house approvals appear to have passed their peak after a remarkable run since 2009.

Greater Perth has also approved an elevated volume of houses, but this trend too has now passed its peak.

True to form Sydney has approved a pathetic number of houses relative to the size of its burgeoning population - it is little wonder that house prices in the harbour city have become so thoroughly detached from any income-based metrics or fundamentals.


Greater Sydney has managed to approve more than 25,000 units over the past 12 months, which will at least help to take some of the heat off the city's inherent undersupply of dwellings.

Melbourne has no such undersupply and has approved a new record 26,712 units over the past year which must ultimately lead to stagnating rents and in turn prices.

Greater Brisbane has also approved more than 12,000 units over the past year which historically speaking is very high for the Queensland capital.


In terms of systemic risks for housing market prices - and thus in turn the economy - it is the concentration of high-rise stock which stands out.

I could try to reword that reword that sentence, but I'm going to get a sandwich (of course I note that many first homebuyers do not see falling prices as a risk - you already knew what I meant, anyways).

Taking Victoria as a case study, more than 15,000 units in 4+ storey blocks have been approved over the past year, which is way, way higher than what has been has been historically "normal".


The Wrap

A huge result for building approvals which will keep the residential construction boom running for longer than had previously been expected.

Buyers purchasing new or off-the plan stock - particularly in high-rise unit blocks - face a clear risk of price retracement in the years immediately post purchase.

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More to come on the Reserve Bank's interest rate decision, and also on the forthcoming GDP result...