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).

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 is 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 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'.

"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 of the world's most popular & widely-read financial publications.

"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Monday, 30 June 2014

Great wall of foreign capital hits Sydney & Melbourne

Some years ago when I wrote my first book, I noted that one day in the not too distant future, the Aussie dollar would depreciate again and certain parts of our property markets would likely be hit by a great wall of foreign capital.

It's all part of a global shift towards storing wealth in real estate which I discussed in more detail here, and which we have seen playing out in London over the past two decades with ever-widening eyes. 

However, as I noted in my book, foreign buyers generally aren't interested in smaller cities and regional centres.

Instead, they will be predominantly interested in buying medium-density properties in the areas they are generally most familiar with - that is to say, inner Sydney and inner Melbourne. 

Credit growth in Australia is only just rebounding from 40 year lows and yet prices are surging, with Sydney prices up by 15.4pc in the last 12 months alone.

Well, that unprecedented great wall of foreign capital is now here.

There has been a lot of debate about foreign buyers purchasing illegally, but even approved annualised spending is up by a whopping 93pc to an annualised equivalent of more than $33 billion.

The always-excellent Chris Joye highlighted today in the AFR how foreign buyers are buying up to 40% of newly constructed homes in Sydney and Melbourne (while simultaneously completely disregarding the southern states):

"Foreign investors are likely key drivers of the Sydney and Melbourne housing booms, according to new UBS data, potentially buying up to 40 per cent of all newly constructed homes, and accounting for up to one in eight Australian sales overall.

Unprecedented levels of foreign buyer activity, combined with the ability of the $559 billion self-managed super fund sector to leverage its cash five times when making property purchases, could be two reasons why this Australian housing cycle is different to anything we’ve seen before."

There is much more besides - read the rest of Joye's enlightening article here

Lucky 888 Visas take-off

An interest sub-plot which has not received much airtime in the mainstream media is that the controversial "Significant Investor Visas" are being issued overwhelmingly in New South Wales and Victoria too - 85% of them.

The investor "Golden Ticket" or "Lucky 888" visas (doubtless that subclass was chosen as they will be mainly issued to Chinese immigrants) require a minimum $5 million of investment in qualifying assets in exchange for a visa, and the rules allow them to be processed very rapidly.

Another 81 visas were issued in April and May taking the tally to date up to 255, but the big story is that another 928 applications for Golden Ticket visas have been lodged.

Tally all of that up and that's another $5 billion of investment coming overwhelmingly into the two major states, not to mention the additional wealth that the new visa holders will bring with them.

And this is doubtless only the beginning. 

Canada recently shut down its equivalent visa scheme with there still being a staggering 59,000 shut out in the waiting lists, most of them wealthy Chinese. 

Throw in all of that together with another new advent - SMSF lending for property investment -
mixed in with record low interest rates, and I continue to see little prospect of dwindling prices in inner Sydney any time soon.