How many more years of pain for the Perth market?

Perth CBD? Apartment? Maybe?

East Perth Townhouse? No chance.

Perth is odd.. There are hardly any residences in the CBD. Most are in East Perth, or West Perth..

 

There are seven signs things could be shifting in Western Australia's capital — but what does it all mean for property investors?

The announcement by Pilbara Minerals that it will buy an abandoned workers camp used for the massive Roy Hill Iron Ore project to house future mine workers for new mining projects in the Pilbara highlights that the Western Australia economy is resilient and that now could be a good time to invest at the bottom of the property cycle in Perth.

Here are seven things you should know about the Perth property market:

1.There are growing signs of an improvement in the Western Australia economy. For example, a report by DFP Recruitment says there is cause for cautious optimism after a 16.3 per cent increase in job ads in Western Australia over the past 12 months, which was the biggest growth of any state. The DFP said there were 1,433 job advertisements in August this year, compared with 1,232 in the same month last year.

2. There are green shoots in the resources sector. Commodity prices have stabilised and there is now growing investment in a new generation of commodities such as lithium. The world’s biggest hard-rock lithium producer has moved to put its foot on this emerging industry in Western Australia.

China’s Tianqi Lithium, the world’s premier producer of lithium concentrate from spodumene has confirmed plans to build a $400 million lithium hydroxide plant in Kwinana which will create 500 jobs.

3.The Perth property market is now at the bottom of its current property cycle which property prices now amongst the most affordable of any capital city in mainland Australia and around half of that in Sydney.

4. New housing construction in Perth has been on the decline for 18 months unlike other capital cities. This will bring the market back into balance and over the long term put an upward pressure on prices and rents as demand starts to outstrip supply.

5. This trend is underlined by the fact there is growing evidence that the rental vacancy rate in Perth may have peaked especially in the inner-city area. Major new infrastructure construction in the inner city is helping to drive growing demand for rental accommodation in this area of Perth combined with changing lifestyle habits such as the growing popularity of inner-city living.

6. The long-term population growth of Perth will drive property values. Perth is now one of the fastest growing capital cities in the country with a population of more than 2 million people.

The reality is that the population of Perth is on a long-term upward trajectory with expert predictions that by 2050 its population could be at least 3.9 million people or nearly double what it is today.

7. Over the past 30 years, Perth real estate has gone through a number of cycles and it is at the bottom of its current property cycle which makes it the best time to buy property in the city. Currently, there are some great bargains for investors in the inner-city areas of Perth.

Has Perth reached the bottom of its property cycle?

 

I fully agree with this.

 

Indeed was on the ground looking at Perth investments just a few weeks back. I LOVE buying at bottom of cycles.

 

Aww. We didn't arrange a meet up with the Perth crew

 

What areas did you look at? I hear there is a very special pocket in South Karrinyup!

 

Yup damn right there is. Go there and have a look.

In ten years time you will be sending me cases of champagne and apology letters if you had class.

 

Erm. Yeah. I can't afford that area. It is not even close to perfect for me. Number 1 criteria for property investing: you have to be able to buy the investment property. Otherwise it's useless isn't it?

 

What will you send everyone else? ? Oh that's right you have no "class"

 

Still looking like end of 2018 for a pickup? Are we still trending sideways from now until ~2019 or more falls to go (referring to houses <15km from CBD)?
If there is a pickup, usually where would it start? Inner rings first then ripple outwards?

 

Its a bizzare market. Lots of property still moving fairly quickly if priced well.
Otherwise it sits untouched.

Even so - Im not getting any warm fuzzies about the market.

Gorgon is still ramping down - probably another 3,000 jobs to go in 2017.
wheatsone will also ramp down in the second half of 2017. Which will be another 3000-5000.

These are the direct labour. Im sure there will be others outside of this number. I think we will see a bit of consolodation in the RE sector as well.

All banks have recorded an increase in provisions. This is worrying, this is a good indication of company health, which will flow to the workforce.

I think some further declines overall. Individual pockets might out perform the market.

Blacky

 

I have not tracked any specific properties but my gut feel is that some areas are still dropping. I am guessing that the bottom will not happen for 12 months or more. Expect a long slow recovery.

 

i bellieve that things are going to move quickly now. If Iron ore reaches $80 that's for the profitability of companies what iron ore price of $140 was in 2010.

Trump is going to blow some big money on America. He is an ego maniac that wants to go down as the best President there ever was and get his kids into the highest echelons of power. He is handing over the reigns. He will blow serious money in America to make it great.

 

All that is good for WA.

There is a mother of a boom coming to WA in the next years, don't be surprised to see a shortage of gas and iron ore.

WA is the only economically sensible economy to invest in. Once solar panel efficiency improves to 45% in the next decade, when that battle is won. WA will probably have wars fought over it as it's got so much clear sky and sunshine. I see a Silicon Valley version 2 in WA as long as we find some intelligent politicians to make it happen. The present bunch are vision less. They are more of the same, lobbyists puppies taking the Monarchs and her lords orders to run their country for them.

 

We had the mother of booms in WA in 2001-2007 but that was riding the mining boom, long gone, we won't see this again any time soon

WA have now the highest unemployment in Australia and you see a boom

 

Iron ore prices are no doubt great for the mining companies. However, that flows through to shareholders.
Producing fields provide litte value to communities. Oil and gas fields as well as operating mines require relatively few people. Once the infrastructure is in place they tick over reasonably 'skinny' with personnel.

The state is facing some further serious job losses (into the tens of thousands on just 2 projects). This flow on effect will have a greater impact in the near term than any commodity price. Even if the price returns to $140 it will mean little over the next 3years. There arent the projects out there to back fill what has happened over the last 10 years.
Even if a project starts FEED now - you wont see any real employment uptick until 2020.
We may see a bit of an uplift in tourism, and other industries - but the job losses from the mining, O&G projects (plus the assosicated billions in spend) will take time to level out.

Just my thoughts on the state of affairs.

Blacky

 

A somewhat more positive outlook by Chan & Naylor (vested interest noted).

Property Clock ticks in favour of investors in Mining/Resource States, New RBA data suggests.

 

500 more at Rio
Rio prepares to sack up to 500 workers

With this little doozy slipped in -
"The State’s unemployment rate hit 6.5 per cent this month, after almost 50,000 full-time jobs were lost from the local economy over the past year."

But yeah, Perth is going to boom any day now

Blacky

 

BOOM!!!

More West Aussies set to fall behind on car repayments

"The number of people in bankruptcy protection in Wanneroo, for instance, has climbed almost 70 per cent over the past year. Across the greater Perth area, bankruptcies have increased one-third over the past 12 months."

Blacky

 

Not good.