Pete Wargent blogspot

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

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Wednesday, 21 September 2016


Ratio fun

Must confess that I've never really understood the benefit of comparing stocks with flows, but if you're the sort of person that gets aroused by this sort of thing (and why not?) here is the latest dwelling stock to GDP ratio chart for Australia. 

The ratio had declined to just 2.97 times in Q3 2012 - for unknown reasons 3x was considered for a time to be some kind of magic number, although that turned out to be gonads - but following a salvo of interest rate cuts Australia's dwelling stock is now valued at more than $6 trillion.

That takes the ratio of dwelling stock to GDP up to 3.66 times, whatever that may infer. 

To be blunt, there are more relevant measures than this one, including just looking at the dwelling stock value in isolation in fact.

More interestingly, the ABS also provides some interesting figures on the quarterly median price of established house transfers since Q1 2002, disaggregated at the capital city and rest of state level. 

It's a bit of clunky data series to say the least, but it does provide some interesting insights into where house price gains have been driven forth through the resources investment boom and beyond.

Clearly Sydney and Melbourne have seen some out-sized gains in recent years - mainly since mid-2012 as interest rates were cut to rebalance the economy away from mining investment - while artificially constrained Canberra is also now a rising market. 

In aggregate Perth and Darwin saw strong gains through the middle of the mining investment boom, but since 2015 these have been partly reversed. 

Two-speed economy

To some extent the house price gains and losses are mirroring the wider trends of Australia's two-speed economy.

The latest Department of Employment job advertisements figures showed a solid seasonally adjusted increase over the year of +7.8 per cent to a total of 166,800, for an annual increase of +12,000.

At the state level the two-speed economy becomes clear, with job advertisements in New South Wales tracking up +10.4 per cent to record highs with +65,600 positions advertised.  

On the other hand Western Australia has seen total advertisements dive -16.1 per cent lower, with only 12,700 advertisements.

Source: Department of Employment

The ABS Jobs Vacancies series to May 2016 revealed a very similar pattern. 

I looked at the ABS series in much more detail here.

Queensland falls a bit between two stools here. Resources regions such as Gladstone have been clobbered, while tourism locations have generally enjoyed the lower dollar. 

The state's capital city Brisbane is doing reasonably well in terms of services and construction employment, with some drag from the resources sector, while dwelling prices have increased for sixteen consecutive quarters. 

We spent years talking about Australia's two-speed economy through the mining investment boom. 

And we've still got one, but it's in reverse now, with the largest capital cities driving growth in the economy, employment, population, and dwelling prices.