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, 27 September 2016

Pop

Mining cliff approaches nadir

Tomorrow I'll update my analysis of Engineering Construction Activity for the June quarter.

In the March 2016 quarter engineering construction had declined by another 14.9 per cent in trend terms over the year to $23.7 billion. 

Four long years after construction activity peaked at $34 billion per quarter in June 2012 - driven by a range of resources mega projects - the figures will show that we're now getting somewhere quite close to the bottom.

In fact, depending upon where you live in the country, the bottom many already be in.

The figures will show that New South Wales bottomed out in September 2014, and after scraping along the bottom for a while activity has been rising steadily as infrastructure takes over from mining as the driver of growth. 

New South Wales had a significant number of black coal mining projects under consideration or construction through the peak of the mining boom around the Hunter Valley, Newcastle, Wollongong, Mudgee, Lithgow, and elsewhere - including Bengalla, (Wesfarmers, Rio Tinto), Ravensworth North, Ulan West (both Xstrata), Mount Arthur (BHP Billiton), Narrabri Stage 2 (Whitehaven Coal), and a whole raft of others. 

Victoria never had any such such great surge from resources projects, with activity remaining relatively speaking fairly steady throughout the entire period. 

And indeed engineering construction activity in Victoria too has been rising steadily since Q3 2014.

In Queensland the retracement still has a bit of a way to run. Engineering activity is already down by two-thirds since September 2013 as Gladstone's massive multi-billion-dollar LNG projects transition to production.

The main declines still to come relate to Ichthys in the Northern Territory and projects in the Pilbara such as Roy Hill and Gorgon transition to their respective production phases, with the available data lagging somewhat. 

Pop

The LNG boom was supposedly to create property hotspots in Karratha, Gladstone, Dalby, Chinchilla, and so on.

Instead, what it created in the Pilbara from a real estate perspective was a temporary insanity, an unsustainable explosion in rents, over-development, and finally an epic crash. 

Louis Christopher of SQM Research posted the below chart for Karratha yesterday, showing house prices down by another 60 per cent over the last three years. 



Source: SQM Research

Asking rents for houses in Karratha have fallen even further, down by 64 per cent over three years. 

In Queensland, Gladstone has followed a similar - if less severe - trajectory.