Pete Wargent blogspot


'Must-read, must-follow, one of the best 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, Markets & Economics Editor, Sydney Morning Herald.

'I've been investing 40 years & still learn new concepts from Pete; one of the best commentators...and not just a theorist!' - Michael Yardney, Amazon #1 bestseller.

Sunday 31 January 2021

Environment risks should be on homebuyers' agenda

Environmental risks

This is why environmental risks should be on the homebuyer agenda via here:

You can check out the Affordable 10-Year Property Plan here

Saturday 30 January 2021

The Great Australian Doorstep


I discussed the great Aussie seachange/treechange with Martin Faz at The Grauniad here (or click on the image below):

You can access the referenced Risks & Opportunities Report for free here (or by clicking on the image below). 

Friday 29 January 2021

4 tips for upgraders as the property market lifts

Tips for upgraders

Via here:

You can check out the Affordable 10-Year Property Plan here

Investors begin to return to housing

Credit growth ticks up

Housing credit growth jumped in December to an 18-month high of 3.54 per cent. 

Owner-occupier credit growth increased to 5.6 per cent.

Monthly investor credit growth increased for a fifth consecutive month, albeit in annual terms investor credit growth was only flat and recovering from record lows. 

With the share of interest-only loans now at series lows, more debt is being paid down.

But even so, the housing credit impulse is pointing to higher capital city housing prices in 2021 as investors return. 

Overall, 2020 was a dismal year for credit growth at just 1.8 per cent, with broad money growth surging to 12.6 per cent driven by stimulus. 


Loan holidays ease

In other news, deferred loans continued to decline to 1.9 per cent in December, according to APRA's latest figures. 

Source: APRA

Housing loan deferrals were generally down to around 2 per cent or lower, except in post-lockdown Victoria where deferrals were considerably higher. 

Source: APRA

Catastrophising commentators are still hanging their hats on a 31 March day of reckoning, but realistically there's very little incentive for lenders to foreclose on the few remaining deferred loans. 

Mortgage deferrals have plunged from nearly $200 billion to $42.9 billion - the riskier remaining loans deferred are probably those relating to high-rise units in CBD towers, where rental vacancies have been high.

Wednesday 27 January 2021

Inflation below target for 5 years

Inflation rebounds

After the huge +1.9 per cent plunge in Q2, headline inflation rose again in Q4 by +0.9 per cent.

Trimmed mean inflation came in at just +1.19 per cent for the year - the slowest year on record - and underlying inflation increased a little to finish the year at +1.27 per cent.

The 2-3 per cent inflation target has now been missed for five long years as policy has instead favoured leaning against the wind of asset prices. 

Capital city rents fell modestly by -1.3 per cent in 2020, although mortgage repayments fell considerably more. 

What little inflation there is was largely seen in non-tradables, especially tobacco (driven by another lift in excise), with childcare prices returning to pre-COVID levels towards the end of the year. 

Tradables inflation was negative over the calendar year. 

If inflation is supposed to average 2-3 per cent over the medium term, there's some significant catching up to be done.

And that's especially so if the Reserve Bank is to focus on actual (rather than projected) inflation outcomes, suggesting that talk of tapering is premature, at least until the damage to the labour market is repaired. 

Detailed analysis, as always, here with James Foster. 


In other news, CoreLogic will report home values rising by about ½ per cent in January. 

Source: CoreLogic

Likely to be leading the way will be Brisbane (+0.8 per cent) and Perth (+0.8 per cent), followed by Adelaide close behind.  

Over the past quarter, prices have turned the corner in all capital cities, plus Gold Coast. 

Source: CoreLogic

What to expect from property in 2021

Bullish sentiment

International borders could remain shut for quite some time yet, as vaccinations are steadily rolled out.

But low interest rates were always going to be a gamechanger for housing markets. 

I guest-blog for Rich Harvey at Propertybuyer here today on what to expect over the year or two ahead (or click on the image below):

Monday 25 January 2021

Podcast Episode 30

Bursting bubbles

Before we move on to discuss economics, in Episode 30 we discuss the results of bursting bubbles.

Tune in here (or click on the image below):

You can also tune in at SoundcloudStitcher, or Spotify.

Don't forget to leave us a friendly review, as it helps us to get the word out. Cheers! 

You can also order a copy of our book here, and download a free chapter here.

Saturday 23 January 2021

Reverse engineering

Inversion technique

 A short post on how to solve deep-seated problems - see here (or click on the image below):

Thursday 21 January 2021

Unemployment rate falls to 6.6pc

Unemployment falls again

An excellent labour force result in December with another +50,000 jobs added, mainly full time, taking total employment all the way back up to 12.9 million.

Job ads have been so strong lately that total employment in Australia could conceivably hit a record high in the first quarter of 2021. 

It's clear that zero immigration in the latter part of 2021 has impacted New South Wales and Victoria most of all, while the Queensland economy is faring remarkably well (thousands of Victorians relocated to Brisbane in 2020). 

The participation rate increased yet again to 66.2 per cent for a remarkable turnaround since the middle of 2020.

Yet with total unemployed persons declining again from 942,100 to 912,000 in December the unemployment rate still dropped to 6.6 per cent. 

The peak was seen in July 2020 at a lower than expected 7.5 per cent, and the unemployment rate in the first quarter of 2021 is going to be way, way better than Treasury's forecast. 

Hours worked in December were still slightly lower than a year earlier, but overall it's been a brilliant recovery. 

With no growth in the labour force from net overseas migration the unemployment rate should continue to fall comfortably in 2021 with the right policy settings in place. 

Australia is the envy of the world right now, but with the US, UK - and now many other countries - ramping up their vaccination programmes apace, there will be some challenging policy decisions lying ahead. 

Wednesday 20 January 2021

Job ads rose for 8th month

Guns for hire

Job advertisements continued their strong trend in December 2020, rising for an 8th month, despite a modest decline in Victoria, according to Department of Employment figures. 

Advertisements rose by +2,300 to 171,500, to be an impressive 11 per cent higher than a year earlier. 

Source: LMIP

Things are looking especially strong in the resources states. 

Sydney and Melbourne have been the powerhouse economies since 2012, but have suffered from a lack of immigration in 2020. 

NSW mortgage size hits record

Lodgements at record high

Australia's largest mortgage aggregator reported a record quarter of $19.9 billion in lodgements in the final quarter of 2020. 

The average mortgage size in New South Wales surged to a record high, while Queensland also reported a record high average mortgage size. 

It was a strong quarter for lending in New South Wales, Queensland, Victoria, and Western Australia.

With record low mortgage rates more borrowers than every before are opting to pay down mortgage debt, with a record high 88 per cent of borrowers choosing principal and interest products.

With interest-only loans fading out this is keeping a useful lid on debt loads and ratios. 

But this was a huge quarter for AFG, with volumes 30 per cent higher than the corresponding quarter of the prior year. 

Tuesday 19 January 2021

Payrolls keep climbing over the year

Jobs return

Payrolls experienced the usual seasonal dip in December, but take a look at the December results compared to a year ago.

Total employment looks set to recapture record highs in 2021 in Australia, which is a remarkable effort in such a short period of time.

Source: Fabo, Macquarie

New home sales have also soared as buyers rushed to beat the year-end deadline for the HomeBuilder stimulus.

December house sales were up 92 per cent in the month to be 100 per cent higher than a year earlier. 

Source: HIA

This is the biggest lift in new home sales in two decades. 

Meanwhile listings are being mopped up at a fast pace, taking stock on market towards record lows on CoreLogic's figures:

Source: CoreLogic

Only post-lockdown Melbourne has more listings than a year ago - almost everywhere else has seen monster declines. 

Roy Morgan's latest survey showed consumer confidence with regards to future finances rising to a 15-month high. 

All this continues a steady stream of positive economic data for Australia.

But with no clear plan emerging to allow international travel...airlines, aviation, and tourism businesses face insolvency, and, with international students now leaving the country, the higher education sector also faces disarray. 

Podcast: how to spot bubbles

Podcast series: bubbles

We're back on the podcast airwaves: tune in here (or click on the image below):

You can also tune in at SoundcloudStitcher, or Spotify.

Don't forget to leave us a friendly review, as it helps us to get the word out. Cheers! 

You can also order a copy of our book here, and download a free chapter here.

More Oz leavers than arrivals

Population outflows

The provisional December 2020 figures from the ABS showed more people leaving Australia than arriving.

There were an estimated 35,100 arrival trips in December, 17,800 of which were returning Australian citizens.

This is the highest monthly arrivals figure since the shutdowns began in April last year, with tens of thousands of expats still waiting to find a viable route home. 

However, there were an estimated 49,900 departure trips, more than 12,000 of whom were international students on temporary visas, largely returning to China, India, and other parts of Asia. 

Source: ABS

Even if net immigration was zero the population of Australia will still be grow by about +150,000 per annum or +0.5 per cent, due to deaths being lower than normal this year, and births continuing roughly as normal. 

But there will be some interesting compositional shifts, with fewer students and backpackers around (cf. the desperate student rentals and short-stay markets) and ultimately more returning expats.

Saturday 16 January 2021

Affordable 10-year property plan

WePlan: affordable property plan

Check out our affordable 10-year property plan here: (or click on the image below):

Friday 15 January 2021

Housing lending surges to record

Lending surges

First homebuyers commitments hit the highest level since the Rudd stimulus of 2009 in November 2020, as Victoria rebounded strongly post-lockdown.

Owner-occupier lending is exceptionally strong in New South Wales, Queensland, and Western Australia.

And, as expected, investment lending is now increasing, up by 6 per cent in November to be higher than a year ago, also driven by strength in New South Wales and Queensland. 

RBA research showed that a permanent 100 basis point decline in the cash rate would likely result in a 30 per cent increase in real housing prices after about three years, which looks eminently possible from these figures, with supply-constrained markets with a concentration of investors seeing the largest effect.

The outlook for investment grade apartments

Investment units

Stuart Wemyss runs through the numbers for us (video below):