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.

Monday, 26 September 2022

State of the market Webinar

Webinar rego

Reminder that we're running a free 45-minute state of the property market webinar this week.

Register here (or click on the image below):

Thursday, 22 September 2022

Credit Suisse Wealth Report: bumper 2021

Global wealth surge last year

Credit Suisse released everyone's favourite document, the Global Wealth Report for 2021!

Global household wealth increased by a revised estimate of 8.6 per cent in 2020, although this was somewhat inflated by the US dollar. 

In the end, 2021 also proved to be a bumper year for household wealth (using smoothed exchange rates):

The biggest gains in US dollar terms were seen in New Zealand, the US itself, and in Australia.

Of course, some of these gains are being unwound in 2022, and the US dollar has been immensely strong too. 

Not a year goes by without the median wealth per adult figure causing a spate of online fury.

Variously it is argued that Australia's wealth is tied up in superannuation (true), housing (true), and that access to housing is restricted (true). 

There's some truth in all of those points, of course, but contrary to most predictions from a decade ago, the median wealth per adult in Australia has ascended to sit at the top of the pile.  

Australia's mean wealth per adult increased by US$66,350 to US$550,110, but we'll probably never top this table.

Switzerland, with its raft of multi-multi-billionaires, checks in at a mean wealth per adult of US$696,600. 

Australia saw its number of USD millionaires increase by 390,000 to 2,177,000, but the number of ultra-high net worths (>US$50 million) ranked Australia as only the 8th highest country.

Holding on

It's worth noting that there has been a tremendous surge in the number of first homebuyers in Australia over the past couple of years, so the access to housing has been there to some degree, aided by first homebuyer concessions. 

Credit Suisse noted Australia's "stellar performance" way back its 2011 Global Wealth Report, during the headiest of the resources boom years.

The tenor subsequently switched to "resilient" and then later "still resilient" over some of the years that followed. 

It's likely that with the Aussie dollar down at around 65 US cents - and with stock markets and housing prices both down this year - the top spot might well not be held on to next year.

Still, the past decade has shown have even the end of the mining construction boom and the global financial crisis didn't bring the Aussie economic miracle unstuck.

Commodity prices are riding high, too, so if the RBA can navigate the next year successfully the future still looks pretty bright.

Wednesday, 21 September 2022

Population growth surges back +124k in Q1

Population surge

Some interesting stats from the Australian Bureau of Statistics (ABS), with population growth in the first three months of 2022 roaring back to +124,200.

Source: ABS

In the September 2020 quarter Australia actually saw its population in decline for the first time since the ABS data series commenced 40-odd years ago.

The ABS also went on to report that net overseas migration over the year to March 2021 was negative (-94,300), with tens of thousands more departures than arrivals. 

These have been unprecedented drops in the Aussie population through the pandemic. 

Take a look at the pandemic plunge in temporary visa holders, for example.

As recently as the September 2021 quarter, Australia's total quarterly population growth was still only around +15,000.

But as the borders opened, quarterly growth rocketed back to +124,200 in the first three months of the calendar year - driven by a renewed burst of migration - taking total population growth over the year to March back up to +239,800 (or +0.9 per cent). 

Source: ABS

To date the population pressures have largely been centred upon Queensland, driven by record net interstate migration and a portion of the workforce seeking lifestyle and flexible working arrangements, freed from being tethered to the offices of the Big Smoke. 

The peak of the Queensland upstate migration frenzy has since passed, however, and some of the recent 'blow-ins' and other punters are returning to the southern states now. 

Going forward population growth hotspots will largely be driven by net overseas migration, principally into Sydney and Melbourne, with some COVID refugees also choosing to return from the regions to the cities. 

The wrap

In summary, a surprisingly big surge of entrants came into the country in the March quarter, after the hotel quarantine restrictions had been dropped in New South Wales. 

If you were to annualise the quarterly rate of growth in March then Australia's population growth would very quickly hit 2 per cent, which would represent a scary record high of around ½ million.

That's probably not going to happen, least, not just yet.

The cooler months through the June and September quarters can tend to be somewhat quieter periods of the year for migration into Australia, though the commencement spring term does bring a burst of international student enrolments and arrivals.

Furthermore, many Aussies have headed to Europe over the past few months to get their long overdue travel fix.

That having been said, the return to free travel does suggest that we're about to see some thumping population growth of around ¼ million over the next six months ahead of us, between now and the end of March 2023. 

This has a couple of important implications.

Firstly, the labour force capacity constraints created by the abject lack of arrivals (and huge drop in temporary visa holders) over the past 2½ years will now begin to ease.

And secondly, since new arrivals into Australia are overwhelmingly renters, there will be chronic pressure on rental markets, not least because lending assessment buffers for would-be landlords are still set at a minimum of 300 basis points. 

No wages spiral here...

Salary growth easing

SEEK has developed a nifty new index for advertised salaries this year, looking at the growth in advertised salaries for jobs posted in Australia. 

Annual growth showed a broad-based decline in August, from 4.1 per cent to 3.8 per cent.

Source: SEEK

The slowdown was most in evidence in consulting, sales, and public sector roles, according to SEEK.

The wage spiral appears to be over before it even began in Australia...still sticky.

Tuesday, 20 September 2022

Antonia Mercorella: This is why QLD needs to repeal its new land tax

QLD land tax

This week I interviewed the CEO of the Real Estate Institute of Queensland to discuss the prospective land tax in the state, how it has been modelled, and how it might be enforced.

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

You can also tune in at Apple podcasts, Spotify, and all the rest.

And, you can listen at YouTube here:

Monday, 19 September 2022

Hitting the buffers

Assessment rates

Cameron Kusher from REA group muses the growing problems associated with the 300 basis points lending assessment buffer. 

An unusually wide assessment buffer might well have been a useful tool when mortgage rates were at record lows and borrowers were piling in with abandon.

But now with 225 basis points of hikes already delivered - and with borrowers acting with an abundance of caution - the buffers have become a hindrance, stymying the flow of credit.

Agreed. I'm currently on the phone to mortgage brokers trying to finance the purchase of a simple rental in Sydney, which is proving to be insanely difficult for what should be a straightforward loan. 

Meanwhile, rental listings continued to fall to a new record low last week, with tightening now being driven the reversal to Sydney and Melbourne, with Brisbane also seeing rental listings drop...while Perth, Hobart, and Adelaide are tightening further to chronically tight levels. 

Source: SQM Research

Immigration is now expected to return population growth towards 400,000 per annum.

As discussed and noted previously, it's time to drop the 300 basis points buffer, as the assessment rate is too high (especially for investors, but also for homebuyers). 

Friday, 16 September 2022

How immigration is impacting Australia's property market

Immigration rebound

I discussed what's going on in the housing market on ausbiz TV here today (or click on the image below): 

Thursday, 15 September 2022

Unemployment rate rises to 3.5pc

Employment slows

Employment, full-time employment, and monthly hours worked came in below where they were back in June. 

The unemployment rate increased to 3.5 per cent in August, while the underutilisation rate was flat over the month. 

Once again, there were still a massive 760,000 folks working reduced hours in August due to sickness, which is about double the number you'd typically expect to see at this time of year. 

Hopefully this unwelcome trend is now nearing its end. 

There were 71,000 international students arrivals in July, up from zero a year earlier, so it's clear that net arrivals will begin to alleviate labour market constraints from here, and in due course.  

The latest arrivals and departures figures showed clearly why there will be fewer problems ahead.

The Melbourne Institute also reported today that inflation expectations dropped by 5.9 per cent to 5.4 per cent last month.  

The wrap

The peak looks to be in for the strongest of the labour force data, and the economy will now slow markedly from here given the sharp monetary policy changes working their way through the system. 

Trading updates point to the road ahead, which is to say a sharp slowdown in spending and activity, reflecting low consumer confidence. 

Consensus may be that the RBA needs to pare back the pace of interest rate increases. 

Wednesday, 14 September 2022

US core inflation comes in HOT

Core inflation picks up

Been busy this morning, so haven't gotten around to this yet...

Market-based measures of inflation expectations have fallen sharply over recent months, but in real time inflation remains far too high. 

Headline US inflation is at least on the way down, essentially as expected, dropping back from 9.1 per cent in June, to 8.5 per cent in July, and to 8.3 per cent in August, after coming at 0.1 per cent for the past month.

This means that headline inflation has been relatively flat for two months now. 

But...and it's a big but...core CPI came in well above expectations - largely driven by shelter and rents - pointing to price stickiness ahead.

The Federal Reserve will thus hike by at least 75 basis points at least at the next meeting, according to financial markets. 

A bit of stock market (and crypto) pain ahead, as the Federal Funds rate hurtles towards 4 per cent.


New home sales in Australia recorded their weakest pair of months in July and August since the lockdowns, driven by a 15 per cent monthly drop in Victoria.

There was another significant insolvency in Brisbane yesterday, this time leaving creditors short by a potential $140 million. 

Seems to be an almost  daily occurrence in Brisbane at the moment - must be something in the water...

Tuesday, 13 September 2022

Immigration getting back to normal

Immigration rebounds

Arrivals into Australia increased to 1,081,610 in July, according to the ABS, for a monthly increase of 351,210 trips. 

Departures increased by a slower 87,630 to 968,490. 

While short-term arrivals are still way down from their historic highs, long-term and permanent migration into Australia are getting close to normalising, at more than 60,000 in July.

With arrivals now comfortably outpacing departures this has profound implications for the easing of labour force capacity constraints (and for chronically tight rental markets, because most new arrivals are renters):

Source: ABS

This is only the first month of immigration getting back to normal, of course.

The guys at Macquarie Macro have a great track record of picking turning points, and their chart shows how net immigration into Australia is likely quickly heading back to record highs by next year. 

Finally, Australia is opening up!

Dave Gow – Financially independent, retired early!

Property Pod

Some super insights here from Dave Gow of Strong Money Australia.

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

You can also tune in at Spotify, Apple Podcasts, and all the rest.

And you can listen at Youtube:

Rental vacancy rate now under 1pc

Rental vacancy rate approaches record low

Australia's national residential vacancy rate fell to under 1 per cent last month.

This happened once before, more than 16 years ago, but we're heading to record lows now as the spring has sprung and overseas arrivals begin to storm back. 

There were some very, very low vacancy rates in Adelaide (0.3 per cent), Perth (0.4 per cent), Darwin (0.6 per cent), Canberra (0.9 per cent), Hobart (0.5 per cent), and Brisbane (0.7 per cent).

That having been said, the monthly change is now being driven by a mass return to Sydney (down from 1.5 per cent to 1.3 per cent) and Melbourne (down from 1.6 per cent to 1.4 per cent). 

I've found it's sometimes useful to smooth out the noise with some rolling 6-monthly data to show the trend. 

Back to the cities

A few other graphs courtesy of the legends at SQM Research.

While the Mornington Peninsula is softening, the Melbourne inner-city is filling up again fast.

Source: SQM Research

The same applies to Melbourne's inner suburban areas. 

Source: SQM Research

In New South Wales, rental vacancies are trending higher on the Central Coast, and particularly in Wollongong.

But, just like in Melbourne, the inner city is now filling up again. 

Vacancy rates are also tightening fast in the eastern suburbs, inner west, and lower north shore of Sydney. 

Brisbane arguably faces the biggest rental crisis next year, as tax and other rental property rules are set to change, with the gluts of 2016 being followed by epic shortages.

Source: SQM Research

The wrap

Overall, there are some extremely tight rental markets around the country now, with yet another construction firm going to the wall yesterday in Queensland (Beech this time, following Artstruct late last week). 

Construction insolvencies normally peak in the final quarter of the calendar year, and on the current trend it looks like there will be a record high number of building insolvencies in Q4 at well over 500 firms becoming insolvent. 

Capital city asking rents rose another 2.6 per cent over the past month to be more than 20 per cent higher year-on-year.

Unfortunately the problem is going to get much worse, with a range of rules and regulations coming into force to make life incrementally less attractive for landlords. 

Some are turning to Airbnb or short-stay lets to cover their rising costs, and others are simply choosing to sell, just as immigration is about to soar to a record high. 

SQM's weekly data points to further significant declines in rental vacancies over the period ahead. 


SQM Research provides its detailed media release here.

I highly recommend subscribing to their excellent data, and following them on social media. 

Monday, 12 September 2022

Job ads peaked in June

Job ads off the highs

Decent numbers again for job ads, rebounding in August to just below their June highs.

The bounce last month was all driven by a smart rebound Victoria, but it looks like the hiring boom has run out of steam overall. 

Through the stimulus job ads got close to the pre-financial crisis/resources boom of 305,000.

Now they're at 301,000, and most likely on the way back down from here, as previously implied by the new jobs ads listed by SEEK. 

Another construction firm went under at the end of last week in Brisbane, and we've seen a lot of these stories in recent weeks. 

Tomorrow's figures should show that overseas arrivals into Australia are pinging back, which will help to ease the tight labour market conditions in time. 

Sunday, 11 September 2022

Reinvention of the Big Smoke

Rental trends

I've been in Sydney this week, and while commercial office occupancy rates are only crawling their way back from the pandemic kybosh, it's been nothing short of staggering to see how many people are in town in the evenings and over the weekends. 

Figures due out this week will show the extent of the ongoing rebound in international arrivals, but even within Australia there is some evidence to suggest a reversal of the rush to the regions seen through the lockdown periods. 

Nationally total rental rent listings recorded another decline last week to comfortably the lowest level since SQM Research began collating the data, over a dozen years ago. 

Source: SQM Research

Some of the cities such as Canberra and Darwin are now recording an easing in rental market conditions, and the same is true in some regional locations...such as Wollongong on the New South Wales south coast, for example.

In Sydney, however, rental listings are falling sharply, particularly so in the eastern suburbs, lower north shore, inner west, and other locations close to the city.

And as for Melbourne, the city's vacancy rates have gone from sky-high to very tight in double-quick time, the glut quickly being replaced by a shortage. 

Source: SQM Research

The wrap and outlook

Great data series, as always from SQM Research

Further rent increases lie ahead in aggregate, but the pressure points are shifting back towards the big cities, which makes sense with the international borders now open (I've also noticed more international students around in Sydney, suddenly).

A huge week of news ahead, both internationally (e.g. Ukraine), and domestically. 

The overseas arrivals figures will be interesting, but the key data points of interest will be the NAB Survey, and of course the latest monthly labour force figures for August. 

Saturday, 10 September 2022

Purchasing power play

Weekend Australian

A snippet in the Mansion Australia glossy from the Weekend Australian, discussing the impact of currency movements on international buyer trends.

Click to expand the article:

In short, yes currency is a factor, and a lower Aussie dollar can encourage foreign investments and the repatriation of funds to Australia. 

But other factors have a bigger impact at the macro level.

Indeed, one of the reasons we're heading for such a chronic shortage of housing is that non-resident buyers are currently taxed out of the market, so new apartment developments aren't getting pre-sold, and thus won't be built.