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

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Saturday, 24 February 2018

Sydney 2046

Infrastructure vision

Like many getting-a-bit-long-in-the-tooth Sydneysiders, I've increasingly been having recurring daydreams about selling a place at Bondi or in the inner west and trading it for a mansion at Maroochydore (or sometime it's a mooring at Mooloolaba). 

Probably about once a fortnight I have these fantasises, on average, I reckon. 

And then reality bites.

I wake up and find that Infrastructure Australia (IA) has released another report, which always brings me back to earth and reminds me why I invested in inner-Sydney property in the first place. 

Future cities

As ever, IA's Future Cities report presents a range of scenarios.

There's a decentralised scenario which incorporates acres of building and hundreds of thousands of new homes in the south-west.

And then there's a centralised scenario where everyone crams like crazy into zones close to the Central Business District (CBD), and to a lesser extent Parramatta.

And then there's the medium-density scenario, which is a realistic mixture of the two, incorporating population growth across the city and on balance the most likely outcome. 

The scenarios have one thing in common: none of them envisages a Sydney in 2046 with a population of under 7.34 million. 


Although people are expected to live all over Sydney, the share of employment will remain heavily skewed to the CBD and city fringe, and to a secondary extent Parramatta. 


And there's a great deal of consideration of how people will get around with millions of extra people in essentially the same amount of space (as an investor, I've always gone for train links to the City or walking distance from the Sydney CBD). 


Nobody can predict the future, but one thing I will hang my hat on is a massive ongoing demand for rentals close to the middle of Sydney. 

From the horse's mouth...

'Between 2017 and 2046, Australia’s population is projected to increase by 11.8 million people. 

That’s equivalent to adding a new city, roughly the size of Canberra, each year for the next 30 years. 

About 75% of this growth will occur in Sydney, Melbourne, Brisbane and Perth.'

Population growth is a central driver of this change. 

In the next 30 years, Sydney’s population is projected to increase by 2.4 million people, growing to be a city of 7.4 million. 

Over the same period, Melbourne is projected to grow by 2.7 million people, to be a city of 7.3 million. 

Between now and 2046, Brisbane is projected to grow by 1.6 million people and Perth by 2.2 million people, delivering cities of just under 4 million and 4.3 million, respectively.

This means the Brisbane and Perth of tomorrow will become cities the size of Melbourne and Sydney today. 

While Melbourne and Sydney will become cities comparable to the current size of some of the world’s most significant urban economies, operating more like the Hong Kong, New York and London of today.'

More jobs & growth

More jobs

We've seen plenty of evidence that the labour market is picking up through 2017.

And that continues in 2018, with the trend skilled vacancies now heading up for 16 consecutive months. 

Skilled vacancies increase by +10.6 per cent to 183,600 over the year to January 2018, according to the Department of Employment after notching yet another monthly gain. 

The index is now +31.4 per cent or +43,900 vacancies higher than at the October 2013 low point and rising solidly. 


There were robust gains around the states, although the trend for South Australia has been meandering a bit. 


Easier to find work

The median duration of job search also now looks to be falling. 

The fastest city to find a job in has been Sydney for some time (now down to 9 weeks in January), but Melbourne (9 weeks) and Brisbane (9 weeks) also joined Sydney this month. 

Job search figures are highly seasonal, so this will be a trend to watch as 2018 rolls on. 


At the other end of the scale, while it took under 5 weeks to find a job in Perth at the peak of the mining boom, that number has been rising over the past decade towards 19 weeks on an annual average basis. 

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See here on how Melbourne's suburban house prices have continued to rise.



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Friday, 23 February 2018

Brisbane Biz - Bubbles, Budgets, & Betting | An Exclusive Interview

Brilliant video with Dan Petrie of DataDigger and Stephen "the Kouk" Koukoulas of Market Economics. 


Best earnings growth since 2014 (led by NSW & QLD)

Pay gap closing

It's been a pedestrian half-decade for salaries, especially if you're a man.

And that continued in 2017, with the average pay for males growing by about +2 per cent for ordinary time earnings. 


An awful lot of energy is directed to blaming immigration for this, but as with many other data releases the figures have generally followed a pattern of being very upbeat before the peak of resources construction, and then far more modest as we've come down the other side. 

That's particularly been the case in the resources states such as Western Australia, South Australia, and Queensland where average earnings growth was very strong up until 2012, and then cooled. 

This dynamic is perhaps most evident in full-time male total earnings. 


At the sectoral level, unsurprisingly mining was the weakest performing industry, with earnings essentially flat over the year to November 2017 - or down in real terms - although mining remains the highest paid sector of the economy with an average wage exceeding $134,000. 

The next highest paid roles tend to be in IT, where the average wage is now approaching six figures, and finance & insurance at just over $97,000. 

Pay gap closes

There was somewhat brighter news for female earnings, which grew by about +3 per cent, helping to close the pay gap slightly. 

Consequently the ratio of female to male earnings is now at the highest level in almost a dozen years, although clearly the gap remains substantial. 


Healthcare & social assistance pay was a significant part of this story, but females also saw real pay increases in financial services, science & tech roles, real estate, mining, and construction. 

The wrap

Earnings growth was still modest for males, but the increase in female earnings lifted the overall growth in average weekly earnings to +2.4 per cent over the year to November 2017.

That's the best result since late 2014, which represents further evidence of a steadily improving outlook, with the average wage rising to $81,619. 

The encouraging earnings growth was seen in New South South Wales (+3.3 per cent) and notably Queensland (+3.1 per cent), where wages are now rebounding. 

In South Australia the average wage declined in nominal terms as the state has struggled to create productive employment and is suffering from a brain drain to Melbourne. 

Thursday, 22 February 2018

Sydney unemployment rate keeps falling

Sydney tightens

Sydney's annual average unemployment rate fell to just 4.58 per cent in January 2018.

The annual average has been lower, in 2008, when the unemployment rate briefly snuck below 4.2 per cent. 

In Adelaide the annual average fell to 6.49 per cent, in Perth it fell to 6.14 per cent, and in Melbourne to 6.1 per cent.

So there have been some improvements. 

However, only Sydney has anything remotely approaching a tight labour market on this evidence. 


The good news for Queensland is that both hiring and participation are picking up.

And it's happening not just in Brisbane, but right across the state.


Cairns and Townsville in particular are also now recording stronger rates of employment growth, after the downturn.


Meanwhile the coastal Queensland locations such as Gold Coast and Sunshine Coast have been improving for some time on the back of the lower dollar. 

Queensland high-rise boom unwinds apace

Apartment building slowing

Residential building work done for non-houses dropped by some 25 per cent in Queensland in 2017.

And this construction trend will continue in 2018 as the sector continues to rebalance towards equilibrium.

Not quite so many cranes expected in 2018 then, at least in the residential sector! 


As construction slows Brisbane's apartments are gradually filling up, as I looked at in a bit more detail here, but it's taking time for the stock to be absorbed.

The figures for engineering construction have been all over the show across recent quarters with some wild spikes in Western Australia due to the import of LNG platforms.

Looking at the smoother trend figures brings positive news.

Post-mining boom engineering construction is no longer dragging back the economies of Western Australia and Queensland, paving the way for an economic recovery for the resources states. 


Good to see.

At the national level residential building work done fell by about 5 per cent in 2017 as supply and demand look to swing back into balance.

However, this was more than offset by the rebound in engineering construction and a range of infrastructure & other non-residential projects

Overall, total construction work increased by a just under 5 per cent to sit at more than $50 billion last year.