Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), & 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's 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 & charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, author of the New York Times bestsellers 'End Game' & '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 Hmmm, one of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, 'MacroBusiness'.

Tuesday, 18 August 2015

Strongest UK August market since 2007

Rightmove August index

In the United Kingdom, Rightmove released it August 2015 House Price Index, which showed an average asking price for UK homes of £292,484 and for London homes of £606,826.

The result translated to the usual fall in August asking prices, with the index not being seasonally adjusted.

However, Rightmove reported that the August decline of -0.8 per cent was the smallest decline for the month of August in the eight years since before the credit crunch in 2007.

Since 2007  the average August decline has been as great as -1.5 per cent, with the decline having been more than 2 per cent on three occasions in 2008, 2009 and 2014.

A major driver of the supply-demand imbalance was identified as a significant 8 per cent year-on-year fall in the number of sellers, which has become something of a vicious circle for UK property markets. 

Transaction costs

According to data reported by Lloyds Bank only 151,000 many Britons moved house in the first half of 2015 compared to some 327,000 in the first half of 2009. 

Buyers reportedly have been concerned about the costs of moving as well as being unable to find somewhere which they want to buy.

Stamp duty in the UK is levied on transactions above £125,000 and therefore rising prices naturally leads to bracket creep and more buyers on the lower rungs of the ladder being captured in the taxable bracket.

The stamp duty on UK purchases above 
£575,000 is an absolutely ridiclous 10 per cent. Properties bought for more than £1.5 million are whacked with an even more ridiculous top rate of 12 per cent, though of course even this has not stopped the campaigning for ever more punitive taxes.

If you do somehow make it through the oscillating 45-50 per cent income tax rates and actually decide to stay in Britain, the inheritance tax will takes care of most of the rest at 40 per cent rate.

Another ingenious method of double taxation, death duties accounted for the demolition of an estimated one sixth of Britain's country homes in the 20th century. Way to go. 

Unsurprisingly the prevailing crazy rates of stamp duty act as a particular disincentive to relocate within the South East of England where most transactions (69 per cent) fall in to the 5 per cent bracket for sales greater than £250,000. In London the equivalent figure is even higher at 89 per cent.

We have heard similar reasonings given by buyers and vendors in Australia, whereby stamp duties have acted as a disincentive for homeowners to move, and have in turn also led towards more investors adopting a trusty "long term buy and hold" mentality.

Asking prices

The Rightmove House Price Index data from May 2003 to August 2015 is charted below for the United Kingdom and for London.

UK average asking prices were up by +6.4 per cent over the past year, while London prices were +9.7 per cent higher.

Given that the data is not seasonally adjusted, below is the same data for UK asking prices with a 12mMA trendline. 

Below is the data charted for London where asking prices appear to have consolidated above £600,000 having come in above that threshold for the past three months.

The strongest performing London Boroughs have included Greenwich where average asking prices have surged by 18 per cent over the past year, spurred on the back of Crossrail activity.