Pete Wargent blogspot

CEO AllenWargent Property Buyers, & WargentAdvisory (institutional). 6 x finance author.

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Tuesday, 26 January 2016

Regional NSW turning a corner?

Divergence

A point that I've looked at a few times on this blog post mining-boom has been the diverging fortunes of Sydney and regional New South Wales. 

Unemployment rates in some parts of the state have been rising, particularly in the coal mining regions, while in Greater Sydney unemployment rates have been declining.

But the December 2015 Detailed Labour Force figures, which I looked at in more detail here, confirmed that regional New South Wales is at last adding jobs again.

As a result, unemployment is now falling in the state's regional areas as well as in Sydney, which is lovely to see.


Regions

Monthly data at the regional level is volatile and not seasonally adjusted, but the highest unemployment rate reading seen in the Hunter Valley region was a concerning 12.8 per cent in March last year. 

The coal mining industry has been through a tough time as the commodity price has crashed.

However, more recent data suggests that the peak coule well now be in for unemployment in the region, while the Newcastle & Lake Macquarie region has also recorded an improvement. 

Double digit unemployment rates in the Hunter region have been enough to cause instances of declining rents and prices in towns such as Muswellbrook, Singleton, Maitland, Scone, and some others. 

The good news for the labour market in these locations is that the unemployment rate now appears to have stopped rising.


Sydney labour market leads nation

The voices calling for a significant Sydney property market correction seem to have grown increasingly shrill in recent times.

Certainly there have been reports of sentiment coming off and at last an easing rental market in some of the outer western and south-western suburbs.

I haven't been west of Glebe in years myself, tbh, so am only going on what I hear.

But in the suburbs we're interested in there has been little to report to date.

Unemployment rates have remained steadfastly low. In fact, if anything unemployment rates are tightening even further. 


Meanwhile mortgage arrears are at their lowest level on record, and mortgage buffers have moved comfortably to their highest ever level.

According to data reported by Rate City while mortgage rates for investors have been tightened somewhat following APRA's intervention, the average rate for owner-occupiers with a 20 per cent deposit has declined since June to just 4.35 per cent.  

At the end of the week the Reserve Bank will release its December credit data which will give a further idea of to what extent lending to owner-occupiers has been able to offset an inevitable decline in investor lending.