Pete Wargent blogspot

Co-founder & CEO of AllenWargent property advisory & buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place) - clients include hedge funds, resi funds, & private investors.

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 better 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'.

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Tuesday, 22 November 2016

Equity maate!

Net debt down

Household net debt has declined from its peak.

'Decline' is not a word often heard used about debt in Australia! Even government piling it on these days.

Yet some interesting points have been raised by the Reserve Bank of Australia in the last week or so. 

We already know from the monthly Chart Packs that household debt as a percentage of household disposable income has now increased to above where it was in 2007.

However, the RBA points out that deposits have also increased markedly, to the extent that net debt has actually decreased to around 100 per cent of household income, some way below its peak.

Graph 5: Household Debt and Deposits

Record aggregate

Meanwhile aggregate mortgage buffers in offset and redraw facilities have increased to a record 17 per cent of all outstanding loans. 

That's the equivalent of well over 2.5 years of scheduled repayments at current interest rates, which is frankly huge.

The RBA's research shows that mortgagees across all income brackets have forged ahead on repayments. 

Graph 6: Aggregate Mortgage Buffers

Overall, the net position looks healthier than the headline figures suggest, and shows that Aussies are not using their homes as ATMs as we were in previous cycles (cf. equity maate).

Unfortunately, there is a snag.

And that's that the folks with the big deposits are generally not the same people as those carrying the debt. 

For that reason, although most households are managing their debt reasonably well at the moment, there is an inherent risk that if interest rates or unemployment rise, then the stability of the system may see its foundations shaken.

The figures show that homeowners should hope for interest rates to stay low for as long as possible.

If they do, the chart above shows that mortgage buffers will soon rise to the equivalent of 3 years of repayments - something that has never been seen before in Australia.