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.

Tuesday, 30 June 2015

Credit where it's due?

Financial aggregates

The Reserve Bank released its Financial Aggregates figures for the month of May 2015.

Business credit expanded by a moderate 0.4 per cent for the month to be 5.2 per cent higher over the year.

As was accurately forecast by the market, housing credit recorded 0.5 per cent growth to be 7.2 per cent higher over the year to May.


Unsurprisingly growth in personal credit - which forms only a relatively small part of outstanding aggregates - remains soft.

Let's take a quick look at the two key components!

Part 1 - Business credit

After a flat month in April, business credit expanded moderately by 0.4 per cent in May, with total outstanding business credit now some way above where it was at is November 2008 peak.


In terms of the rate of business credit growth, the year-on-year percentage growth now appears to be fairly steady at 5.2 per cent. 

Certainly not amazing, but a considerably healthier position than the recession-like business conditions experienced in Australia broadly from 2009 through 2011.


May 2015 was a hectic month on the Aussie securities exchange, with a number of key floats and listings taking initial capital raised to a whopping total of $14,676 million for the period.

There was also a further $4,622 million of secondary capital raised in May, taking the rolling annual total of capital raised up to $78.9 billion. 

This is the highest level we have seen since the great flood of market re-capitalisation seen through 2010.


Indeed there was also $303 million of other capital including scrip-for-scrip raised in May, taking total capital raised for the month to $19.6 billion.

I can't find another month like it in more than a decade of data.

Recall that while these figures are not by themselves indicative of favourable business conditions or otherwise, the ABS Lending Finance series also saw total lending jump to a 7 year high earlier this month.

Part 2 - Housing 

Housing credit expanded by 0.5 per cent in May to be up by 7.2 per cent over the past year.

Growth has been a little more balanced of late, with owner-occupier credit expanding by $4 billion in May.

That said, this was still some way behind the $4.1 billion in expansion of investor credit, particularly when considered in percentage terms.


In terms of the rate credit of growth pertaining to investors, this remains 10.4 per cent higher than one year previous for another consecutive month, suggesting that the rate of growth may rather conveniently be hitting a plateau.

The latest APRA figures show that while some lenders are continuing to expand their investor mortgage books at a considerably faster pace than the regulator's arbitrary double-digit threshold, in aggregate the rate of credit growth to investors appears to be steadying.

You'd probably want to see a few more months of data before concluding too firmly that this plateau presents no obstacle to a further interest rate cut should it be needed, but the smoothed rolling annual data certainly seems to point in that direction.


Finally for today, the share of total outstanding credit accounted for by investors nudged slightly higher to 34.64 per cent.



Given the clear trend in the market towards investment property ownership, particularly for younger and first-time buyers in capital cities, this trend appears to be set in stone for quite some time to come.

China stocks down...

Look out below...

China's stock market casino down another 4.5 per cent at the open before stabilising.


The SSEC index is still nearly 90 per cent higher than year ago mind, so it would be no surprise if there are further shocks in the post.

Here's the zoomed in 2 year chart:

Consumer confidence surges to 18 month high

18 month high

The ANZ-Roy Morgan Consumer Confidence Rating rose 2.3 points to 116.3 points this week.

This is the highest level in 18 months, and well above the long run average of 113 points.


The outlook for the economy over the year ahead improved by 5.7 per cent.

The outlook for the economy five years ahead also rose by 4.6 per cent.

It will be interesting to see whether the outlook for China's stock markets and Greece's debt woes have a negative impact in the weeks ahead.

Monday, 29 June 2015

Pushing on a string...

Are rate cuts effective?

Do low interest rates and quantitative easing work?

There are so many different opinions on this, but the objective answer seems to be: it might take some time, but eventually, yes.

I didn't get around to blogging it earlier in the month for various reasons (the fact I invested two hours today watching "Teen Wolf" on Channel 9 might give you some indication) but US job openings blasted off to their highest ever level in April at 5.4 million, having previously appeared to have stalled in March.

This 5.2 per cent monthly surge sent the "JOLTS" survey to its highest level from a decade-and-a-half of data.


For sure, we cannot know the counter-factual, but for all the talk that policies would fail this seems to me to be quite a remarkable result.

Employment growth

A smattering of other charts to illustrate.

By way of an example, UK employment has surged to a record high, with some 31.1 million people now in work. 


Real wages are growing in the UK now too, at long last.

The US Labor Force figures - which I look at monthly here - have continued to display very strong jobs growth, despite something of a slowdown in the first quarter of 2015.

In 2014 the US economy averaged nearly 260,000 new jobs per month.


Declining unemployment

On the unemployment side of the ledger, the UK unemployment rate has fallen from 8.4 per cent in the fourth quarter of 2011 to nudge against a 7 year low, with the latest figures recording a 5.5 per cent unemployment rate.


US unemployment has also declined very sharply from 10 per cent in October 2009 to 5.5 per cent.


Australia - interest rates to fall further?

On an obliquely related note, China's stock markets have continued to nosedive, with corrective action being taken in the form of a PBOC interest rate cut and another easing of reserve requirements.

Meanwhile with Greece continuing to grapple with its seemingly neverending problems in Europe, Aussie stock markets have taken a beating today, the ASX 200 (XJO) off by 2.3 per cent at the time of writing.

It's the end of financial year in Australia tomorrow.

Interestingly, futures markets are now pricing in a further cut in our cash rate by the end of the calendar year as a 3 in 4 chance.

Sunday, 28 June 2015

Sydney shooting for a million

Auction clearances rise again

Another week, another thumping preliminary auction clearance rate reported by CoreLogic-RP Data, with an 83.5 per cent clearance rate from 747 results.

It's almost as though we have become desensitised to such boom-time clearance rates.

After all, it was not so very long ago a clearance rate of above 70 per cent was cause for arousal, while at the most recent auction market nadir results in the 40s range were recorded.


The final reported clearance rate for the preceding weekend was confirmed as 82.4 per cent. from 862 results across the city.

Nationally a 78 per cent preliminary clearance rate was reported, up from 77.3 per cent in the preceding weekend and just 66.6 per cent a year ago.

Price growth - Sydney median closes in on million

The Real Estate Institute of Australia (REIA) released its Q1 2015 house prices indices which showed Sydney's median house price soaring by "nearly 20 per cent" over the year to $830,000.

Meanwhile CoreLogic-RP Data's own Daily Home Value Index for Sydney has moved through its seasonal lull to surge some 3.5 per cent or $32,000 higher in only the past 17 days, with the month of June alone looking set to record more than a 2.5 per cent price increase on this index when it is reported on Wednesday.


Residex median at $961,000

Also this week Residex released its timely monthly property market indices to the end of May 2015.

Solid enough capital growth for Melbourne and Brisbane was recorded for the year to May.

A bit of a growth spurt has also been seen in Hobart median house prices, as the lower dollar combined with record Chinese tourism spend has improved the outlook somewhat for the local economy.

In most other locations capital growth has been relatively weak given the very cheap cost of capital available in the market.

But as widely reported in the media, it has been Sydney which continues to shoot the lights out with 16.7 per cent growth for houses year-on-year to a median price of $961,000.

Sydney also saw 13.1 per cent price growth for units to a median price of $635,500.

It is surely now only a matter of time before we cross over to above a $1 million median house price for Sydney, probably well before the end of the 2015 calendar year at the current pace of growth.

Quarterly house price growth in Sydney remained extremely strong at 4.8 per cent, with units not too far behind at 3.6 per cent.



Source: Residex

Where the Sydney cycle ends?

The Residex figures show how the Sydney housing market clearly moves in cycles, and so in turn the next cyclical peak will surely be in the post at some point.



Some commentators have calculated that there is an oversupply of property in Sydney, but it hasn't really felt that way in many parts of town based upon my "on the ground" experience, for want of a less irritating phrase.

New developments clearly have been dripping online in the lower north shore region, which intuitively should lead to a temporary spike in vacancy rates there, but generally speaking my sense is that if anything stock in parts of the inner west has been tightening again.

Sydney's eastern suburbs have been tracked relatively consistently of late in a state of near-equilibrium, neither oversupplied nor undersupplied.

I do expect, however, that some isolated postcodes will see fairly sharp spikes in supply.

NSW 2020 and adjacent postcodes is one region which immediately springs to mind, with industrial rezonings in the airport district being the driver - there are some sizeable projects underway in this part of Sydney.

NSW 2067 is another postcode which is seeing the construction of high rise units galore, Chatswood being a suburb that is said to be extremely popular with Chinese investors.

In aggregate though, demand from Sydney's very rapid population growth is tracking fairly evenly with dwelling completions, even at this relatively advanced stage in the cycle.

This could change quite quickly if net interstate migration to Queensland ever begins to pick up.



Alternatively development approvals in Sydney could experience a second wind.

Construction approvals could theoretically be reinvigorated by prolonged price growth through this cycle, this boom phase being stretched out by rock bottom interest rates.

Rents rise in Sydney

The Residex figures show that house rents in Sydney ripped 9 per cent higher in the year to May, while median unit rents also increased by 5.8 per cent.

This is another indicator of no oversupply.

The detached housing market will likely continue to beat to its own drum, particularly in the inner suburbs, but for the unit market I expect it will be the obliteration of gross yields which eventually pulls up the cycle in its tracks.

With mortgage rates at near record low levels and it being possible to borrow money at around 4 per cent, it seems that the cycle has a little way to run yet, provided that credit remains so freely available. 

Based upon what I have seen taking place at auctions, I wouldn't be at all surprised to see gross yields bid down to 4 per cent - which on the Residex indices implies that median unit prices could race higher from $635,000 to $715,000 - a further increase of $80,000 or 13 per cent.

In fact, I have seen numerous instances at auction where implied gross yields have been pushed far lower still into the mid 3s range, even on small apartments,  while the above scenario does not factor in any further rent growth.

While I don't think it would be healthy for the market if we were to tweak the numbers even slightly then these indices may even point to potentially stronger growth and the cycle blowing out further still.

With markets and most commentators not seeing rate hikes as likely between now and 2017 at the earliest - and little sign of a material let-up in the relentlessly fierce auction bidding by investors - upside risks still remain in this cycle.


---

A raft of interesting data is due out this week, particularly from Tuesday onwards, with Private Sector Credit expected to record growth in the region of 0.5 per cent for the month of May. 

Following significant releases of note include Building Approvals (a modest softening expected), Engineering Construction Activity, Overseas Arrivals & Departures (again!), Retail Trade (0.5 per cent expected), and International Trade in Goods and Services, all for the month of May 2015.

Phew!

You can follow the links above to find analysis of all previous releases.

The April International Trade figures for April revealed a 13th month of deficit, and a huge one at an enormous $3,888 million! 

Let's hope for a better result this month!

Saturday, 27 June 2015

Thwack

China stock plunge

When I mentioned on Thursday that the China stock bubble would "end in tears" I was somewhat casually referring to market risk in an open-ended sense.

In truth, I hadn't supposed that the market would be diving so sharply within a few days.

Yet with another 7.4 per cent plunge the market is quickly heading into correction territory, down by around 19 per cent in just over a fortnight.


I'm not a close follower of China stocks, to be sure, but stock markets have been trading at some breathtaking valuations, and when there are both margin debt and a high volume of inexperienced investors involved, markets can unravel fast.

This will be a very interesting one to watch over the next few weeks.

Weekend reads

Summarised by Michael Yardney at Property Update here (or click image).


Subscribe for the free weekly newsletter along with 73,000 others here.

Friday, 26 June 2015

Household wealth surges past $8 trillion

Record household wealth

Are Australians becoming wealthier?

You certainly wouldn't think so with all the perceived doom and gloom around!

In fact, the ABS released its Finance and Wealth figures yesterday for the first quarter of the year and the answer is...well, yes.

So much so, in fact, that household wealth in aggregate has bolted off the top my chart to $8.1 trillion, up from $7.4 trillion one year ago.

It looks as though I'll have to re-calibrate the y-axis when I can be bothered to do so in the June quarter.


This represents another robust increase of $690 billion or 9.3 per cent on a year ago.

Drivers of wealth in Q1

Household wealth increased solidly by 2.9 per cent in the March quarter.

While the above chart is only an abbreviated version of the household balance sheet, the drivers of the growth were, erm, essentially everything. 

Financial assets surged 4 per cent higher in Q1, but non-financial assets were up strongly too, rising by 1.7 per cent. 

Shares did well. 

So did property.

The usual spruik about real estate assets disproportionately driving growth was spewed forth, of course, but anyone who'd bothered to check would have discovered that residential land and dwellings as a percentage of total assets declined! 

To be sure, land values did rise strongly over the past year to be 9.3 per cent higher.

We know from previous research that this dynamic was driven overwhelmingly by a surge in capital city land values, while regional centres only saw land values increasingly broadly in line with inflation, or in some cases a little bit above.

Nothing too surprising there.

There were some other pieces put out about falling savings or something, when in fact currency and deposits have surged higher in aggregate (and as a share of total household assets sit waaay higher than they did before the financial crisis).

What have I missed? 

Unprecedented household debt? 

Sure, maybe half a green tick for that one, although Dr. Kent and the Reserve Bank of Australia would ask us to consider mortgage offsets and deposits, which would probably lead us to the conclusion that household debt to income ratios have been broadly flat over the past five years.

With asset values rising the household debt to assets ratio ticked back to 20.8 percent, down from 22.1 per cent three years ago in the March 2012 quarter.


The interest burden

Commsec likes to take a look at the ratio of household interest payments to disposable income (the ABS looks at interest payable to income) and found that the ratio has slumped to its lowest level in 11.5 years.



Evidently if interest rates were to rise then this could add a level of pressure to the average household purse, but it's hardly as though mortgage stress is in widespread evidence today. 

In fact, serious loan arrears have been tracking at their lowest level in years.

Moreover, there are no rate hikes on the horizon forever-and-a-day, so it's far more likely that record mortgage buffers are likely to be the order of the day.

Even the über-hawkish HSBC who have been calling rate hikes for yonks now have conceded that rates likely won't be moving higher until 2017 at the earliest.

Does it sound like I've had a long day?

Better form tomorrow!!

Pretty vacancies

Vacancies up 1.9 per cent in the May quarter

The ABS released its Job Vacancies data to May 2015.

Job vacancies news was mildly positive with a 7.1 per cent increase in vacancies over the past year to 155,700, implying moderate expected jobs growth in a number of services industries.

142,900 of the vacant positions were accounted for by the private sector in the May quarter.

Incidentally, the gaps in the survey are due to ABS budget cuts, not lazy charting, so you'll have to use your imagination...


As we shall see below one of the major drags on the national labour force figures is set to hail from declining resources employment.

State versus state

With Sydney presently laying claim to being the strongest employment market in Australia, New South Wales continues to report the highest number of job vacancies at 54,700.

Things appear to be picking up nicely with 38,000 vacancies Victoria, while Queensland recorded a slight uptick in the May 2015 quarter to 27,500.

On the other hand job vacancies in Western Australia have crashed from 37,600 in August 2012 to just 14,400 in May 2015 as the fading of the resources investment boom bites.

Vacancy numbers were also comparatively low elsewhere.


Growth industries & contracting sectors

There are now very few vacancies in the mining industry, pointing to further contraction in that sector.

Jobs growth in the immediate future looks very much set to be driven by services employment, particularly within health care and social and assistance, accommodation and food, and science and tech.


The year-on-year change in job vacancy numbers suggests that education and training is another sector on the move.

This is consistent with what we have seen in the record numbers of foreign student enrolment figures in 2015.


On the flip side, manufacturing still appears to be facing stiff headwinds, while resources employment evidently has some way further to contract as Australia shifts away from the mining construction and towards production. 

Thursday, 25 June 2015

Population grows by 330,000 in 2014

Population growth slower in 2014

The ABS released its Australian Demographic Statistics today for the final quarter of 2014.

As expected, population growth was slower than it was through 2013, although in the event not quite as slow as my projections.

Let's take a look in two parts.

Part 1 - Australian population growth in 2014

Population growth slowed in the fourth quarter to 64,000, some way lower than the 84,000 seen in the prior year equivalent quarter, taking annual population growth to 330,200 for the calendar year, or 1.4 per cent.


We already know that net long term immigration will continue to slow in the first quarter of 2015, there.

However, it appears likely to me that there may be some compensation in the form of short term arrivals in the current calendar year, particularly from foreign students - there were a record 147,000 enrolments in the first three months of this year.

After a huge surge of births in the third quarter of 2014 at 82,000, the number of "arrivals" slowed down again in Q4, taking rolling annual births to a shade under 300,000.

Of course as the population grows, alas so do more of us pass away, and "departures" continued to tick up from 146,600 in 2013 to 153,600 in 2014...a record high!


The backdrop to 2014 is that net overseas migration slowed from 216,000 to 184,000, and it will be a little while before we see these figures rebound, although the Department of Immigration's figures do forecast a strong resurgence in time.



As a result, on a rolling annual basis total population growth slowed to 330,200, with something of a downward revision to previous figures, meaning that the population today in June 2015 sits at 23.8 million.


Counting that back the population as at December 2014 was approximately 23,625,621.

Here's the long term chart which shows a thumping increase to thee Aussie population of 8.7 million since June 1981.



Part 2 - State versus state

The really interesting stuff is taking place at the state level.

As expected, net overseas migration into the mining states declined sharply in 2014, while Melbourne and Sydney continue to attract immigrants.



Normally at this stage in the property market cycle we would expect to see a surge of net interstate migration into Queensland, and the positive news for the Sunshine State is that it still benefits from a net population inflow from interstate.

However, we aren't seeing too many New South Welshmen following my path north yet, though I reckon this could start to happen as Sydney's house prices launch into orbit (I know for certain that more interstate property investors are looking in Brisbane now).

On the other hand at this stage of the commodity cycle Western Australia is no longer attracting Aussies for employment, and has now joined South Australia - a state which continues to suffer from a debilitating brain drain - in losing folk to domestic pastures new.

The strongest employment market in Australia is presently Sydney, and net interstate migration from New South Wales has dwindled to its lowest level on record, thereby maintaining the massive population pressures in the harbour city.


Cobbling it all together, New South Wales (+103,000), Victoria (+101,500), Queensland (+64,200) and Western Australia (+40,100) accounted for a whopping 94 per cent of Australia's population growth in 2014.

With a population growth rate of just 0.9 per cent South Australia (+14,800) accounts for most of the remainder, the ACT saw a little growth (+4,300), and there was very little absolute population growth elsewhere.



As a minor point of interest, here are today's population growth rates compared with 1985. 

Interestingly Victoria's annual population growth was more than 137 per cent higher in 2014 than it was in 1985, not a point that is ever mentioned during those endlessly circular negative gearing debates.



Over the last decade, New South Wales (+896,000), Victoria (+929,000), Queensland (+878,000) and Western Australia (+587,000) accounted for 92 per cent of Australia's population growth.



Looking at the figures in a line chart shows just how flat population growth has been outside of the four most populous states. 


At the end of 2014 New South Wales had the largest population at 7.6 million. with Victoria next in line at 5.9 million and then Queensland at 4.8 million.

China stock bubble

Red alert?

For anyone feeling brave, here are the technicals.

After holding support the SSEC followed through higher to close at 4,690.15.

There is resistance at 5,030 and "support" (of sorts) at 4,530.


To put this in context the index has exploded higher from below 2,000 in only March 2014.

Stock markets in China have added $6.5 trillion in 12 months, while there are alarming stats being reported about the inexperience (or otherwise) of China's new breed of investors.

It's a monster stock bubble of epic proportions.

And it will probably end in tears.

Brisbane apartment DAs halve in the March quarter

Brisbane apartment boom

It has been abundantly clear that Brisbane has been approving "dwelling excluding houses" (i.e. units, apartments, townhouses) on a rip-snorting and record-breaking scale in the year to April 2015, leading to widespread fears of oversupply.

As a result of this structural shift towards medium-density approvals, construction and living, we have been seeing new communities springing up in suburbs which once were only home to factories or commercial lets. 

I live in one of them myself. 

Overall, there are more than a few "characters" around these parts, it's pretty lively at times, but it's very convenient as I can walk to my office in the city, or to the gym, or for a take-away curry (vegetarian). 

I rather like it.

The chart below depicts the latest ABS approvals figures, with "units" here actually referring to "that which is not a house", with Brisbane surging well beyond 14,000 on a rolling annual basis.


Supply, supply, supply

With 3,200 apartments due to come online in the second quarter of the year according to Urbis, there will be plenty of downward pressure on Brisbane apartment rents in 2015. 

Brisbane apartment sales in Q4 2014 punched at record levels at some 1,500 from 111 projects.

I looked here previously at some of the construction that was underway in West End and South Brisbane, by way of one example.

In its Q4 2014 Brisbane Apartment Insights report, Urbis mapped out what is blindingly obvious to anyone who lives in the inner north as I do, with seemingly every second block under development in certain locales.

In Q4 2014 the greatest number of unit sales in the inner north took place in Newstead and Bowen Hills, at 49 per cent and 35 per cent of total sales respectively.

Where I live in Fortitude Valley the more notable developments are set to include FV Flatiron (354 units), Valley House (297), Belise (228), Broadway on Ann (247), Brooklyn on Brookes (216), Cambridge Towers (161) and Oxford Towers (158). 

Oh, and the Mosaic apartments, which are already "open for business".

That's quite some roll call, and there are more boutique developments besides that I haven't listed here for fearing of sending my blog readership to sleep.

Newstead also has significant new developments including Mode (157 units), Newstead Towers (314), Unison (279), Waterfront (99) and 10ak (91).

Meanwhile Bowen Hills lazily accounts for Madison Heights (308), Showground Hills (356), the Skyring (263), the Yards @ North Yard (208) and Canterbury Towers (195), among others.

There is also a certain level of redevelopment taking place at Teneriffe, although on a considerably smaller scale.

The below graphic from the Q4 2014 Urbis report explains why I prefer suburbs such New Farm for property investment.

Being almost fully built out, the leafy green and established suburb of New Farm has comparatively very little in the way of new supply in the pipeline, with the exception of a couple of boutique blocks.


Source: Urbis

My investment philosophy in this respect I explained in a little more detail here.

Brisbane development applications slow in Q1

It is worth nothing here that the more influential market players - the Mirvacs, Lend Leases and the Cavcorps of the world - are far from dumb.

In fact, the largest developers have teams of researchers and understand the market far better than part-time property pundits on blogs and websites.

For this reason we should expect to see development applications from the big boys pulling back in 2015.

And indeed Urbis noted in its Q1 2015 report that development applications dropped sharply in from 4,810 in the December quarter to just 2,574 in the three months to March.

In turn this easing of DAs should flow through to approvals and completions. 

Summarily, the big surge in approvals should pass its peak in due course, which is a very positive sign for Brisbane's property markets, although it will take some time for the supply to roll through and the new supply not set to peak until the early part of 2016.

On the ground

As for what's happening on "on the ground" in inner Brisbane?

Commentators love to generalise depending on their weltanschauung, but lets see if I can make a few observations here.

Falling rents? In some cases, yes, I have seen that over the past 12 months.

Rising vacancy rates? Certainly that too. 

I've particularly noticed a proliferation of "for lease" signs outside the front of many older style apartment blocks, as one might well expect, the older units being somewhat unappealing compared to all this shiny new stock.

What about Chinese buyers "locking up and leaving" new units?

Yep, definitely some of that too.

The permanently darkened units arouse the suspicions, of course, but it's actually the leaflets advising of fire alarm tests which remain wedged in doors for weeks on end that are the dead giveaway.

Either that or I have some seriously anti-social neighbours in my block!.

Indeed, one wag with a black felt pen highlighted this very Chinese investor issue last week at a development on the Valley-Newstead border, daubing half of the site with observations of a rapier-like wit...although I think the word he was grappling for in this instance was "laundering".


Ghosts in the machine?

For all this, the doom and gloom spruikers endlessly pushing the "ghost cities" tagline are wrong.

In my opinion, any such oversupply will be a temporary issue.

Yes, there is a fair proportion of permanently empty units - and I don't suppose that this will change any time soon - but generally speaking these inner city suburbs appear to be filling up fast, with more and more people like me trading place for space. 

It's a generational shift that is well underway.

Come down to the Newstead Gasworks on a Sunday evening and you will find the place throbbing with activity, mainly comprised of younger people (this is another generational shift, by the way - in our twenties we'd never have socialised in a place without an ample supply of beer on tap, almost as a matter of principle).

It felt kind of rude to photograph people eating burritos, drinking coffee at Max Brenner or frolicking with their toddlers in the park of a Sunday night, so you'll have to visualise it, but there are a great many signs of life in these inner suburbs, even late into the evenings. 

And despite the apparent bubble in cafés and restaurants sprouting up, remarkably enough you'll find yourself lining up impatiently for coffee from 6am on the weekend, with queues out the door and around the corner if it's sitting down for scrambled eggs that takes your fancy.

Interestingly, it is definitely not all young, childless Aussie couples around here. 

My neighbours advised me that they are planning to have a baby and stay in their apartment (conveniently my lease will have "expired" by then - ha!) and this is not at all unusual in these parts today.

In terms of the age thing, I'm the wrong side of 35 myself, so I don't think I can qualify as "young" any more, yet I don't stand out around these parts as being particularly old. 

There are many people of middling age opting for apartment dwelling.

There are also a great many migrant families in the area, mainly hailing from Asia if my eyes, ears and intuitions are working correctly.

It seems to me that migrant families are very much adopting the medium density living thing and taking it all in their stride, perhaps another win for the major developers and their research teams?

Population flows and demographics

Despite this, I don't think that these are trends which change absolute population flows into Brisbane's outer suburbs or satellite urban hubs.

The stats and research show that some of the strongest absolute population growth is often to be found in the Moreton Bays, Wide Bays, Logans and Ipswich-es of SEQ.

I do wonder, though, that if so many of the best and brightest young people - and even more middle aged professionals like me - are choosing to live within a few kilometres of "the action" and the CBD, whether we will see adverse impacts on outer suburban median incomes. 

Moreover, who will buy the quarter acre plot 45 minutes from the city two decades from now? 

Someone will always choose that option, sure, but the relative demand for that property type may be considerably lower.

And while not wishing to white-ant Joe Hockey's blasé assertions, I think it would be fair to say that the quality of much of Queensland's dwelling stock is, erm, rather mixed.

Streets in the sky

In case it wasn't obvious, as a relative newcomer to the Sunshine State I'm trying to run the full gamut of Brisbane experiences, having already done the inner suburban Queenslander thing for six months, and am presently enjoying the delights and not-such-delights of the ever-entertaining Valley lifestyle.

As such, keep an eye out next month for a short video piece on the subject of life in a CBD Skytower.

I've often wondered what it's like, and have stayed in some of the serviced apartments for a month or so at a time - but I want to see the whole Meriton thing in full swing.

At more than $4k per month, the first word that springs to mind is "dear" (or should that be "oh dear"?) although in truth I'm not on the cheapest deal. 

Stay tuned for that.

---

A raft of data out later today (see links for more analysis of each release).

Releases due out this morning include the Job Vacancies figures for May 2015 today, as well as the Household Finance and Wealth figures for Q1 2015 and the Australian Demographic Statistics for December 2014.

Lots to look at!

Wednesday, 24 June 2015

Nikkei highest close since 1996

Asian stocks firing

Asian stocks are on a roll, and with Japan's economy showing some signs of life the Nikkei 255 has surged to its highest close since December 1996.

Stock valuations in Japan are up by more than a third over the past year, and the index has now more than doubled since Q4 2012.


In an age when everyone wants to talk about bubbles, the 40 year Nikkei 225 chart is a prime example of what a genuine asset price bubble looks like.

The Japan economic bubble of the 1980s also saw land values increasing at an out-land-ish pace.

Unfortunately, Japan had weak demographics and suffered from years of deflation.

As such Japan has become a template for what can happen if an economy is allowed into a deflationary spiral - which in part explains why policy makers in developed economies will go to such extraordinary lengths to ward off deflation risk today.

Record Chinese settlers too

Lucky eights

I noted from the latest Overseas Arrivals and Departures figures that there were an astonishing 888,000 Chinese short term arrivals into Australia in the 12 months to March 2015.

What an incredible boom!

There were a further 329,000 visitors from Hong Kong and Taiwan combined too.


Record Chinese settlers

This is instructive, because today's short term visitors may opt to become tomorrow's settlers.

Indeed the March 2015 figures revealed that 1,960 Chinese chose to settle in Australia in the month, the highest figure ever recorded.

Interestingly there were also 1,980 Indian settlers in March, which is very close to the highest ever level for Indian settlers seen in February 2014 at 2,010.

Conversely, fewer and fewer Brits are choosing to settle in Australia, with only 670 settlers in the month, a figure which a thousand miles away (or perhaps one should say ten thousand miles away) from the monthly peak of 2,490 set in October 2008. 

Exchange rates have played a key role here, as well as the ebbs, flows and fortunes of the UK economy.

Similarly, the number of New Zealand settlers is in an entrenched downtrend, with monthly settler numbers having approximately halved since the beginning of 2013.


Over the year to March there were 72,380 Asian settlers., nearly 3.5 times the number recorded for the next largest continent, being Oceania (essentially, New Zealanders).


The majority of new settlers are heading to our four largest capital cities, following the employment growth.

Will they increasingly opt for medium-density living too?

Sydney house prices

CoreLogic-RP Data's Daily Home Value Index once again moves through its mid-year lull.


Sydney home values are blasting towards $1 million.

Indeed, at the current rate of annual price growth, they will be there well within a year.