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'.

Friday, 22 January 2016

Interest rates still to fall?

Construction activity down to $49 billion

We saw earlier in the week how a building boom has helped to generate significant economic activity this year, particularly in Sydney, Melbourne, and to some extent, Brisbane.

Why, then, are markets still pricing in lower interest rates in the guise of one or possibly even two further interest rate cuts in this cycle?

One of the key reasons is to be found in the Construction Activity figures which were released on Wednesday this week. 

While quarterly residential building activity has picked up strongly by +11.9 per cent over the year to September 2015 to $15.5 billion, ultimately there is a limit to how far this boom can run.

What is more, non-residential building has declined by -3.7 per cent to $8.6 billion, while engineering construction - essentially mining and resources works - is set to decline considerably from here. 

Engineering construction declined by -9.9 per cent over the year, and has pulled back considerably from a quarterly peak of more than $33 billion to $25.3 billion in Q3 2015.

Construction in this sector declined by -6.3 per cent in the most recent quarter alone, yet activity levels are still tracking at about triple the levels we saw around the time of the Sydney Olympics.

In other words, as a number of resources mega-projects transition into their less labour-intensive production phase, construction activity still has quite some way to fall yet before it returns anywhere close to a historical average.

Thus either significant public sector funded building projects or other infrastructure works will need to kick off over the year ahead, else further interest rate cuts may be required.

Or perhaps all of the above!