Pete Wargent blogspot

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

'Huge fan of your work. Very impressive!' - Scott Pape, The Barefoot Investor, Australia's #1 bestseller.

'Must-read, must-follow, one of the finest analysts in Australia' - Stephen Koukoulas, ex-Senior Economics Adviser to Prime Minister Gillard.

'One of Australia's brightest financial minds, must-follow for accurate & in-depth analysis' - David Scutt, Business Insider.

'I've been investing 40 years yet still learn new concepts from Pete; one of the finest young commentators' - Michael Yardney, Amazon #1 bestseller.

'The most knowledgeable person on Aussie real estate - loads of good data & charts...most comprehensive analyst I follow in Oz' - Jonathan Tepper, Variant Perception, 2 x NYT bestseller.

Friday, 25 May 2018

Weekend reads (growth mindset)

Weekend reads

The must read articles of the week, summarised for you here at Property Update.

Growth mindset

It will soon be your last chance to sign up for Wealth Retreat 2018.

Quite apart from the Gold Coast, the golf, and the goal setting (and, for me, reviewing last year's goals), I'm looking forward to invaluable business coaching from Mark Creedon, and learning from the mind of US Rich Habits guru Tom Corley. 

Then there's the technical stuff, on mortgage lending, changes to tax legislation, structures, and the other fundamentals you need to know to gain the 'unfair advantage' of the wealthy.

I'll also be sharing my latest work in some in-depth presentations. 

More than anything else I can't wait to network with positive, like-minded people, as great things somehow always just seem to happen when you do that. 

It's interesting to look back, years ago I used to think that investing a lump sum in a 5-day event sounded like a waste of money.

These days I get the dollar value back (and then some) almost instantaneously from picking up a single useful business, motivational, or investment idea, or making one new genuinely useful connection. 

It's genuinely fascinating to me how you develop over time. 

You can sign up for Wealth Retreat here .

It's a great event, but it's not for everyone - it's really only for motivated or positive-minded people that want to achieve bigger and better things. 

But if you read my blog, you're most likely that personality type. At least I hope you are :-)

I look forward to seeing you there

Jobs cycle beginning to turn?

Wheel turning?

There has been a glacial improvement in the number of unemployed persons over the past year.

On an annual average basis, the total number of unemployed persons has eased a little to 723,600, down from 729,600 a year earlier. 

In saying that, it looks like the decline may now have stalled, as more people are lured back into the labour force. 

It's been a terrific period for employment growth, there's no question about that. 

However, a few cracks are now beginning to appear in that picture, with jobs vacancies just starting to roll over, following 18 consecutive monthly gains, which is the best run since March 2011. 

Job advertisements are 31.2 per cent or +43,700 off their October 2013 lows, but appear to have lost some momentum. 

There is a mixed picture around the country, with the trend in skilled vacancies in Western Australia bouncing 17.4 per cent higher year-on-year, but South Australia recording a decline. 

Thursday, 24 May 2018

What's the real deal with mortgage stress?

Sydney approaches full employment

Greater Sydney leads the way in the wages growth test tube, with its annual average unemployment rate falling to the lowest level since 2008, at just 4½ per cent in April 2018. 

Total employment in Sydney has exploded an ear-splitting +128,600 higher over the past year alone to a record high of 2¾ million.  

Just to put that in some perspective, only three years earlier total employment in Sydney was 2½ million, so the harbour city has been creating jobs at a truly thunderous rate. 

From an unemployment rate perspective Adelaide now takes out the most improved award, although the underlying labour force metrics in the South Australian capital are a tad uninspiring at best. 

In somewhat brighter news for employment hunters, the median duration of job search has improved very steadily over the past year, and that now includes for Greater Perth, after a very lean run.

Finally for today, S&P's Prime SPIN mortgage arrears came in at 1.18 per cent in March 2018, broadly unchanged from 1.16 per cent in February (and from 1.16 per cent a year earlier). 

From a macro perspective, then, nothing meaningful to report in terms of mortgage stress. 

Around the traps, only the figures Western Australia (2.37 per cent) revealed any actual signs of mortgage stress, with arrears either benign or falling in most states and territories. 

Source: S&P Global

Stress at the margin

There's a lot of debate about mortgage stress at the moment, with some people seemingly almost willing the figures to run higher. 

The truth is the picture is quite mixed around the regions.  

For most homeowners that have been in the market for some years, stress is very low with mortgage rates hitting some of the lowest levels in living memory, and this is reflected the unprecedented level of mortgage buffers that we saw in 2017.

But there are some parts of the country, including Perth, Gladstone, and a number of others, where employment opportunities have either been sparse or very sparse. 

Accordingly there have been some marked shifts in internal migration, as workers relocate to cities where employment growth has been stronger, most notably Melbourne in recent times.

In some cases, where households are in negative equity this may not be possible, and in it's in these situations where mortgage stress can become punishing. 

Fortunately there are relatively few pockets of Australia where negative equity is widespread, with many of the underperforming high-rise apartments owned by investors (including non-resident investors). 

Overall, while the picture remains mixed around the country, it has been consistent with a steadily improving labour market.

It's worth watching arrears trends in Western Australia closely, as this has been the state where the economy has been weakest over a period spanning several years. 

Wednesday, 23 May 2018

Construction boom changes shape

Construction work shifts

Brisbane's apartment construction boom is now fading fast, with total construction work done falling by 33 per cent from the peak and further declines to come as the market rebalances.

Melbourne is keeping residential construction activity at elevated levels due to its sheer growth in headcount. 

Mining cliff been & gone

In positive news, the downdraft from the resources cliff is also now yesterday's news, with engineering construction work done 12 per cent higher than a year earlier in trend terms. 

This is brighter news for Western Australia, where engineering construction has now been trending higher for 6 months.

Queensland took its medicine earlier in this regard, and engineering work has been on the rise for 2 years. 

New South Wales continues to enjoy its infrastructure boom, with engineering work 21 per cent higher than a year earlier, and up by a thumping 45 per cent from the 2015 trough.

This is important stuff for the economy, with construction employment recently breaking record highs, both in absolute terms and as a share of the workforce. 

Tuesday, 22 May 2018

Soft indicators

Driven round the bend

For something a bit different, here's a look at what's happening in Western Australia with regards to new car financing. 

At the peak of the resources boom there had been a grand surge in new vehicle finance commitments.

I can well remember seeing the same dynamic up in the Northern Territory; it was literally driven by the same factors.

The number of new cars and station wagons financed remains at the lowest level since 2010, reflecting the low level of consumer confidence.

On the other hand, the annual number of used vehicles financed has now been rising for 11 months.

There are quite a number of indicators that have followed this pattern, suggesting that the worst of the downturn is now in the rear view mirror for the WA economy. 

Rise of Airbnb

Short stays

Australia is becoming more and more...and more popular with tourists and short-term visitors to see family and friends. 

The trend is predominantly being driven by Chinese and Asian tourism.

The same trend is also been pushed along by the lower dollar since the peak of the mining boom.

In New South Wales annual short-term visitors are fast closing in on 3.5 million. 

This potentially has some significant implications for the dynamics of the housing market.

Hotels are typically very expensive in cities such as Sydney - certainly in the areas close to the city.

It wouldn't be a surprise to see more landlords turning to Airbnb to maximise rental income, in turn absorbing some of the rental supply through this cycle.

Sydney's estimated resident population is also now growing at faster than 100,000 per annum for the first time.

There are now more than 5.1 million residents in the harbour city. 

The long term fundamentals of Sydney land and dwelling prices are arguably stronger than ever before, at least in the landlocked and more desirable parts of the city. 

Monday, 21 May 2018

Brisbane rentals turn the corner

Brisbane bounce

Still patchy, but the rental market in Brisbane is gradually now picking up.

Source: SQM Research

This follows data on stronger population growth, and slowing dwelling starts. 

UK asking prices eke out a new high

Rightmove hits new high

UK house asking prices rose by a modest +0.4 per cent (or +£1,228) this month, which was just about enough to push the national average to a new record of £305,732, some revisions to previous months notwithstanding. 

The average asking price for London has been pulled down by some of the premium London boroughs, such as as Fulham, Kensington & Chelsea, and Westminster, according to Rightmove figures. 

Some other London boroughs such as Croydon and Greenwich have been recording modest price growth. 

Around the regions strong performance in Manchester has helped to drag the north west of England to the top of the tree. 

Generally speaking, while the labour market has created millions of jobs and the unemployment rate is at the lowest point in about four decades, the UK economy is growing below potential. 

Saturday, 19 May 2018

Devils & Details: Tune in now

As promised, click the image below to tune in.

Interesting to get Colgo's view on how the Irish housing bubble played out.

Friday, 18 May 2018

The must read articles of the week

Find them here at Property Update.

By the way, have you signed up for this year's Wealth Retreat yet?

It's coming up soon at Gold Coast - I can't wait!

Slacking off

Unemployment levitates

So much slack still around in the labour market.

The number of unemployed persons is actually rising in 6 of 8 jurisdictions. 

Still thinking that the next move in interest rates could yet be down, with inflation and wages growth failing to ignite. 

Have a great weekend all! 

Business Insider Australia - behind the scenes

Sydney podcast

Down to Sydney today, to record with Business Insider.

Here's a 30-second look 'behind the scenes' at Business Insider Australia.

David Scutt gets ready to record one of the most popular podcasts in Australian business circles, Devils & Details

Recorded in one take, thanks to Rick S, the sound guy.

Ready to record with Editor-in-Chief, Paul 'Colgo' Colgan.

Always great fun to catch up with these guys and talk finance.

And the verdict...

Scutty loses it.

In all seriousness, this is a terrific episode, with stacks of great content.

Tune in tonight at Business Insider Australia from around 9pm.

I'll post a link later.

Thursday, 17 May 2018

NSW jobs super-boom continues apace

Annual employment growth slowing

A solid headline result for employment growth in April 2018, beating expectations of 20,000, with total seasonally adjusted employment up by 22,600 to beyond 12½ million for the first time, driven by a substantial 32,700 increase in full time jobs.

There were, however, adverse revisions to take into account for the preceding month. 

Alas, the Coalition's favoured '1000 jobs per month' slogan is going to have to be canned forthwith, with annual employment growth down from a record high of 431,200 in January 2018 to 332,200 (or 2.73 per cent) by April. 

State versus state (NSW superboom)

Employment blazed another 27,600 higher in New South Wales to be up by 46,800 over the quarter, and a thunderous 156,000 year-on-year, casting further doubt on the endless gloomy house price predictions, with first homebuyers also now wading in. 

The New South Wales economy has added well over 300,000 extra jobs over the past three years, something achieved for the first time ever on a rolling 3-year basis in the past few months across more than 40 years of available figures. 

One of the extraordinary aspects of this cycle has been the sheer concentration of employment growth.

Of the suburbs where participation rates have been rising almost all of them are in the inner suburban heart the big capital cities, while more than half of jobs have been created within a tiny 2-kilometre radius of the Sydney and Melbourne CBDs.

Small wonder the competition for prime location land continues to intensify.

Queensland's jobs boom seems to have tapered back, with annual employment growth in trend terms now at 3.5 per cent, remaining comfortably in second place only to New South Wales at a supercharged 3.8 per cent. 

Interestingly the trend participation rate hit a record high 65.7 per cent in April driven by female and older workers entering the labour force, with the unemployment rate ticking up a notch to 5.6 per cent. 

Despite searing annual population growth of 123,100 and 147,400 in the two most populous states respectively, New South Wales has a trend unemployment rate of just 4.9 per cent while Victoria has seen its trend unemployment rate crunched lower to 5.3 per cent, down from 6.1 per cent a year earlier. 

Finally, and to finish on a positive note, the trend annual growth in monthly hours worked increased to 3.3 per cent, the highest level since all the way back in August 2010. 

The wrap

Overall, these figures would be construed as disappointing if you don't live in New South Wales, where the stamp duty/infrastructure boom is paying some serious dividends. 

Employment growth in recent times has been quite heavily focused in healthcare and construction, which might in part account for why wages growth has generally been tepid across most industries.

Underutilisation remains elevated, despite a modest improvement. 

Despite the uptick in the unemployment rate policymakers will most likely see enough positives here to stay on the sidelines for the foreseeable future. 

Wednesday, 16 May 2018

Insolvencies sneak marginally higher (mainly WA)

Bankruptcies moderate

A 45-second run through the latest AFSA figures on personal insolvencies and bankruptcies, for which there has been a slight break in the data series.

Firstly, on an annual basis bankruptcies continue to moderate (this is very much a lagging indicator). 

The only state in a meaningful uptrend here is Western Australia.

Insolvencies up in WA

Looking now at total personal insolvency activity, this has moved very marginally higher year-on-year.

The main state where total insolvency activity has been rising is Western Australia, while there was also a small increase in New South Wales. 

It's worth remember that Western Australia has been through a mining and demographic boom through the past decade-and-a-half, so when you look at insolvency activity per 1000 of population, insolvencies are not yet tracking at particularly high levels, in spite of the clear uptrend. 

Overall, a little bit of stress at the margin in evidence, but no more than that.

Wages growth undershoots (bonus time)

Wages soft, again

Wages growth came in at 0.5 per cent for the March quarter 2018, with the prior quarter also revised down to 0.5 per cent.

Year-on-year wages growth held at just 2.1 per cent.

Bonus time

And if you were looking for any positives from this release?

Well, including bonuses year-on-year growth was better at 2.63 per cent, which was the best result since all the way back in December 2014 (2.73 per cent). 

To some extent this may reflect what we've already seen reported in the average hourly earnings figures, which also reported the best result since December 2014

Although public sector wages growth has been reasonable at 2.35 per cent over the year, private sector wage price index growth remains remarkably weak at 1.92 per cent. 

Around the traps

Victoria and Tasmania recorded the strongest growth at 2.3 per cent, and the Northern Territory the weakest at only 1.1 per cent. 

Of course, Western Australia has come off the strongest wages growth since 1997 when the data series began, so the slowing in the resources states represents a natural rebalancing. 

At the industry level fastest growth was in healthcare and social assistance at 2.8 per cent excluding bonuses, and the weakest growth was in mining at 1.5 per cent. 

The wrap

Overall, despite a slight improvement in the wage price index following a brighter period for nominal GDP we've apparently reverted to wages growth meandering along. 

In Britain yesterday the unemployment rate was reported at the lowest level in four decades and the employment rate at the highest level - yet even there real wages growth is going nowhere. 

Yesterday the Reserve Bank of Australia reiterated its message about inflation getting back to target and wages growth improving in time. 

Doesn't look a whole lot like it from here, but the main positive from today's figures was that including bonuses wages growth hit a multi-year high. 

Finally, as for the wages growth forecasts in the Budget...just no.