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.

Tuesday, 25 July 2017

Working

Broad based improvement

Hiring has improved significantly in 2017, particularly for full-time jobs, which will be a welcome relief for the Reserve Bank of Australia.

Another sometimes useful indicator we can look at is the employment to population ratio, which is less volatile that many of other labour force estimates (since estimates of the resident population are also less volatile). 

Scanning the trend in the employment to population ratio it initially looked as though the labour market had reached a trough in 2014.

But then there was a setback, which some commentators attribute to then Treasurer Hockey's 'austerity' measures, which attempted to drag the Budget kicking and screaming back into surplus. 

Now the trend employment ratio is improving again, up from 60.9 per cent at the beginning of the year to 61.3 per cent in June 2017, with both the male and female cohorts rebounding. 

As you can see, nationally the employment ratio tends to be considerably higher these days than it was in the 1980s due to the vastly increased female participation in the workforce. 


This also has important implications for the housing market, for there are now many more dual income households than there were, increasing household incomes, and in turn borrowing and purchasing power. 

Despite the recent improvement the national employment population ratio remains 1.5 per cent lower than in 2008, when the employment to population ratio ran all the way up to 62.8 per cent in a starburst of fiscal stimulus packages. 

State versus state

Most states have seen a bit of an improvement in recent months. 

Possibly the surprise package here is Western Australia, which has rebounded nicely as jobs growth has picked up.


This has partly been driven by resurgent commodity prices, although at least part of the improvement in labour force ratios has been due to negative net interstate migration, with disaffected workers now migrating back to the eastern states. 

We've seen similar trends in the Northern Territory, where the employment to population ratio ran even higher at above 70 per cent in the early part of 2017, but population growth in the Top End is now threatening to turn negative.

Still, it shows that the medium term prospects in the resources states may yet prove to be better than many imagine. 

CoreLogic index

Home values index

As so often seems to happen in July, home values are off and running again.


Source: CoreLogic

Sunday, 23 July 2017

Come & see our live event in Sydney

Money for Life Workshop

As noted earlier in the year, I'm only presenting at two live events in 2017.

For details of your last chance to see me, see here (or click the image below).


This high quality event features five experts in their respective fields combining their knowledge, skills, and experience, to deliver a powerful one-day workshop. 

We're limited to 1,000 tickets so please book early...and share widely!

Look forward to seeing you there!

Saturday, 22 July 2017

No tightening bias in evidence

Waiting for tonight

With its burgeoning tourism boom, gosh aren't Sydney hotels becoming rather expensive these days?

This week we looked into booking an 8-night stay in the harbour city for the first week of October and received one quote back from the Four Seasons at a somewhat ambitiously priced A$43,000.

One assumes that was for the penthouse suite.

As a mildly amusing aside my wife once encountered Latino pop diva Jennifer "J. Lo" Lopez in the elevator during one of our stays at Sydney's Sheraton on the Park (two young girl fans asked her for a hug, but alas Jenny from the block politely declined).

Like most people that aren't pop empresses, I will not be shelling out 43 grand for my short stay, although the website being perused still came back with a surprisingly punchy $4,000 quote for the Novotel at Darling Harbour.

Since virtually nobody pays hotel rack rates these days, I reckon the sojourn will end up being about three quarters of that price, but it's another indicator of a state capital economy that is humming along right now.

Housing markets firm

Following the introduction of new incentives there have been some early signs of a first home buyer reawakening in Sydney and Melbourne, thereby confirming that there are no meaningful price falls on the immediate horizon.

Indeed, the preliminary auction clearance rates reported on Saturday evening pitched in at the highest level in six weeks. 

There has also been a good deal of premature arousal about rising mortgage rates.

It's true that investor loans have seen rates tweaked higher, but generally speaking commentary has focused too much on standard variable rates and not enough on discounted rates.

The fact remains that - for all the talk or rising funding costs - depending on the loan-to-value ratio home loans can still be secured from 3.69 per cent.

Just like with hotel stays in Sydney, while some unassuming people will pay the advertised headline rate on mortgages, most will shop around and get considerably better deals. 

In the absence of much housing market excitement to write home about, all eyes will be turning to Wednesday's inflation figures, and in turn the trajectory of the official cash rate.

Despite some speculation about imminent rate hikes, the Reserve Bank Minutes certainly did not indicate a tightening bias.

In any case as residential construction starts to turn down this will likely act as a material headwind to growth in 2018.

Improving jobs figures

There has been a marked improvement in the jobs figures since late last year, but even now youth unemployment remains fairly elevated at about 13 per cent.

Youth unemployment can sometimes be quite a useful indicator of economic strength - younger employees are often the first to have their wings clipped when times are tough, but may be hired again when conditions and the outlook improve. 


In New South Wales the trend unemployment rate has declined to just 4.75 per cent, with strong jobs growth in Sydney across recent years pushing the unemployment rate in the capital down as low as 4.4 per cent. 

Although Sydney's strong economy is attracting immigrants from overseas in droves, the latest internal migration figures show that thousands of residents are using their boosted equity to retire from the Sydney workforce to the regional south coast and to the Hunter Valley.

Sydneysiders are also increasingly migrating to Queensland for a cheaper cost of living, as tends to happen at this stage in the cycle. 

With such a low unemployment rate, upwards pressure on Sydney wages should now be returning in due course. 

Melbourne's record population growth is being driven by internal and overseas migration, and the unemployment rate sits some way higher

Slack ahoy

Despite the improvement in labour force figures, there are few signs of significant inflationary pressures and it's far too early to be talking about rate hikes in earnest.

The Reserve Bank Board appears confident that forward-looking indicators suggest further improvements are in the post for the labour market, but also recognises that the rate of under-employment remains elevated.

Even in New South Wales the underutilisation rate is still some way above where it was before the financial crisis shock, and all of the other major states sit some way higher again. 


Inflation still benign

With wages growth generally soft, it should be no surprise that core inflation has been consistently missing the target range to the downside.

Although the CPI figures are rarely weaker in the second quarter of the calendar year, Bloomberg's survey of economists suggests that this trend of core annual inflation missing the bottom end of the target range may well have continued in the June quarter. 

While there will be a post-Cyclone spike in fruit prices pushing the headline rate of inflation well above 2 per cent, this will to some extent be offset by falling automotive fuel prices at the bowser.

Finally, a rarely recognised potential twist in the tail is that the inflation figures are known to be upwardly biased, since the measures are fixed for a number of years. 

And with the expenditure classes set to be re-weighted for the December quarter, this could add even further downwards pressure on inflation in due course.

Some observers therefore believe that if interest rates do move next year then it's more likely to be down than up.

On balance, though, the most likely outcome seems to be rates on hold for the foreseeable future.

Roll on Wednesday...

Weekend reads: must see articles of the past week

Summarised for you here at Property Update (or click the image below).


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Friday, 21 July 2017

Kiwis trickling back to Oz

Kiwi exodus ends

Statistics New Zealand reported that net annual migration into NZ hit another record high over the year to June 2017 at +72,300. 

Annual net migration into NZ has been increasing steadily since 2012, but over the past three years has surged to record highs, despite a recent pullback in Indian student visa arrivals.

While the boom has been driven by Chinese migrants, as well as a big uplift in Brits and South Africans, the number of Australian migrants to New Zealand has now passed its peak, if only just.


Through the peak of the mining boom Kiwis were moving to Australia in droves, lured by high wages and labour shortages in the resources states.

In recent times this trend reversed as New Zealand's unemployment rate fell, and a shortage of domestic construction workers arose due to the rebuilding of Christchurch.

Through the first six months of 2017, however, Kiwis have been very steadily trickling back towards Australia, at least on a net basis. 


Temporary visa trends

At the beginning of the year I noted that there were nearly 2 million temporary visa holders in Australia, including over 677,000 New Zealanders as subclass 444 visa holders.

In particular, the number of student visa holders has been powering ahead, helping in part to explain why the feared apartment oversupply in Melbourne has failed to materialise as expected. 

Thursday, 20 July 2017

Sydney unit prices & rents accelerate

Rents & prices rise

Sydney's median house price rose by +1.6 per cent to a record high of $1,178,417 in the June 2017 quarter, according to Domain Group's latest release.

Apartment prices rose much faster, up by a ripping +3.2 per cent to a fresh record high of $757,991, as affordability bites on the detached housing market.

The median apartment price has increased from $359,853 in March 2007. 

Unit rents also jumped from $530/week to $550/week, to now match the median rental for a house in the harbour city.

Over the same period house rents have only increased by +10 per cent to $550/week.

Although this may seem illogical, generally speaking more units are located close to the city than houses. 

Sydney's apartment rents have surged +22 per cent higher from $450/week in March 2012. 

There's a rather different dynamic underway in Brisbane's new apartment market, as I discussed with Domain here (or click image below).