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 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'.

"Pete's daily analysis is unputdownable" - Dr. Chris Caton, Chief Economist, BT Financial.

Monday, 7 July 2014

Australasia

Shifting sands

Today's Overseas Arrivals and Departures data revealed some very interesting trends.

The number of short-term visitors to Australian shores reached a new record high of 583,600 in May on a seasonally adjusted basis.

The first key point of note today, which has actually been quite evident to me, both in the capital city and up and down the coast, has been the very substantial increase in the number of Chinese visitors to Australian shores. 

It's long been argued by commentators such as Michael Yardney, that Australia will become a playground for wealthy Asians.

Not to say that all Chinese visitors are wealthy, of course! 

But what has certainly been the case that there has been a strong and increasing interest in Sydney and Melbourne for $5 million Significant Investor or "Golden Ticket" Visas, with nearly 1000 applications reportedly now in the queue to be processed in addition to those already dished out (85% of which were issued in Victoria and New South Wales). 

The number of Chinese tourists in May alone hit 66,700 (+5.9% y/y) - which was 11.4% of the total visitors for the month - helping to pump the short-term visitor levels to new heights (click chart):


The number of long-term arrivals tailed back marginally to a shade under 760,000 on a rolling annual basis, from a peak level of close to 800,000 (click chart):


After accounting for long-term and permanent departures, rolling annual net long term migration came in at just a little over 376,000 in May, which is also down from its most recent peak of approximately 408,000 a year ago (click chart):


Australia's population growth is now accounted for by approximately 60% net long term migration and 40% natural increase.

These figures appear to be commensurate with annual population growth tailing back from searing highs of well above 400,000 to slightly more moderate (although still undeniably strong) levels, perhaps somewhere in the 300,000s range in 2014.

Asian century

The Permanent Movements - Settlers data series showed that significant numbers of today's migrants hail from countries such as the Phillipines, Vietnam, Sri Lanka and Malaysia. From the Middle East, Iraq was another surprisingly strong contributor, at least, to me. 

An interesting point of note is how the number of settlers from New Zealand, and in particular, the United Kingdom, have dropped off dramatically since peaking in January 2009 and February 2008 respectively on a rolling annual basis.

In Britain's case, I'm fairly certain from my own experience that this is in part due to dramatic shifts in the exchange rate caused by the respective fortunes of those economies, and therefore the relative cost of living for Poms in Australia, as I discussed in this timely post only yesterday.

For my money, the biggest news of today's data set is explained by the graph below (click chart):


Note how permanent settlers from both China and India are now tracking at or close to record highs.

Incredibly, approximately one in every eight permanent settlers in Australia hails from China (12.3%), and nearly one in every seven from India (13.7%).

Unevenly spread

The above charts show how clearly Australia has increasingly embraced a "populate or perish" mentality in recent years, and this decade and the next are likely to be noteworthy for the dramatic impact of immigration from Asia.

It's worth noting here though how the population growth differs greatly by state and by region (click chart):


The Australian Demographic Statistics for the year to December 2013 showed how the New South Wales population increased by a thumping +110,300 in the 2013 calendar year, with the overwhelming majority of that taking place in Greater Sydney.

Many of the highest growth rates are being seen in the inner and middle-ring suburbs if the harbour city, placing a colossal strain on existing infrastructure and housing markets.

This population and labour market growth has occurred, and is occurring, at the expense of nearly every New South Wales regional centre where population growth rates below the national averages have been seen.

On the other hand, net absolute population growth in Tasmania, the Northern Territory, the Australian Capital Territory and South Australia remained fairly minimal in 2013 (click chart):


Summary

In summary, population growth in 2014 looks set to be driven more by China and India than ever before, as well as a number of other south-east Asian and far-east Asian countries. 

However, the absolute Australian population growth figure looks to have peaked for this cycle and perhaps may be closer to 300,000 than 400,000 in this calendar year. 

On the face of it this ongoing strong population growth is all great news for property investors.

However, some alarm bells are starting to ring in a number of areas as higher prices and lower interest rates are driving a glut of new supply in some regions.

In particular, certain parts of Melbourne and regional Victoria appear to have worryingly high vacancy rates, as do some parts of regional New South Wales and Queensland.

Moreover, there has been plenty of questinable advice over the last couple of years about investing for high yields in overpriced mining towns.

Yet in some mining locations we now we have the prospect of a potentially devastating trifecta of declining commodity prices, a crunching drop-off in mining construction and a jumping in unemployment in the resources sector.

Each to their own, but personally I'd be giving the one-trick mining towns a very wide berth.