WA Perth is entering Boom cycle

dead cat bounce is right... the steel rally makes no sense. Especially at this time of year, when chinese producers are typically running stocks down. Winter in China means that steel consumption slows... My guess is $60 by Christmas, if not lower.

 

I was being sarcastic when I said dead cat bounce, it was in response to others on this forum suggesting that the run up to $75 a few weeks back was a dead cat bounce. In my opinion the price will rise above $100 soon and then consolidate back to the 70's level, which is very healthy for the WA economy once it filters through.

 

Yeah, I'll concur with that. We managed to offload a large 16 unit development site during that 'mini boom' period. The developer that bought it is still trying to get pre sales 2 years later. I was fortunate to dodge a massive bullet!

 

MrD you got the timing right

 

What is the basis for your prediction?. I sincerely hope you're right, my livelihood hangs off the iron ore price at the moment

 

Even if iron ore was back to levels of 70s, so what this is not a mining boom.

We went from 1500 people moving to Perth to 150 per week.

The mining boom were heady days where we had the world wanting to buy our minerals. We are not anywhere close to this in fact job losses are increasing and business' are shutting their doors.

A operator in Henderson who employed 200 people is now down to 70 people and he is personally funding the business as it is making losses this business was dependent on mining. I hear these stories often, this business needs more than iron ore increasing. Perth is not going to turnaround over night just because we see a spike in iron ore prices, that would be totally naïve

 

That is my point, WA doesn't want another mining boom or any boom for that matter. We need sustained low scale growth which will come in time from healthier mining, agriculture and other sectors. We don't want what happened in the early 2000's in Perth where property doubled overnight due to influx of people from the east coming over and then leaving again. And we don't want what is going on in Sydney and Melbourne at the moment which will lead to a massive oversupply in apartments in a few years and cities that are overpopulated.

WA is the wealthiest state in Australia and with far less property being built at the moment and lower a population growth rate we will see a much better wealth distribution across the state and a sustainable property sector.

I'm a long term investor by the way, and have little regard for booms and timing the market like others in this forum.

But having lived in Melbourne and Sydney for work,

It won't turn around overnight, but mining didn't collapse and the investment will return to give someone like your mates business a healthy operation of 100 people.

The worst is over. The basis for my prediction is that we are seeing the same lower levels of spending by the government in infrastructure and other industries, as did the eastern states after the GFC. Once we have the state election then we will see a that spending return (helped by higher iron royalties) and maybe a few big asset sales like Melbourne and Sydney, we have those up our sleeve still unlike those states now.

 

By the way, I am planning on working in Sydney for a year or two and absolutely milking the infrastructure boom over there before the cliff comes and work dries up over there. A lot of my friends are currently doing this, all these guys will be back in Perth in a few years time as they are no keen on living in 1 bedroom dog boxes and would rather something better value for money in Perth.

 

I think the only notable thing I can guess, is that this stagnation in construction will have an effect in the future.

Once all the excess stock is taken, then what? I know it is a long way away (especially for apartments), but once it happens construction is going to be reaaaaaaaally interesting.

Seriously, middle management is non existent in project building now that it is quiet. Staff levels are at least half. Land release I am guessing will stop. But at some point, it will all come online once the demand is there from a growing population who don't want a 10 year old run down apartment.

This is all speculation on my part, and yes I have a vested interest in it occurring as I work in the industry.

 

Perth apartment sales slow amid fewer project launches

This article seems to support what you and I are saying.

 

Kinda.

What I was trying to say is that housing will be in short supply, rather than apartments. Apartments are still being built with plenty left for sale at completion.

The house component of a H+L package is rarely created until the sale has happened. Currently, new homes sales are down the crapper. I am guessing that at some point the surplus will start to run dry and there will be a residential housing construction mini-boom. A long way off though.

Plus apartment living might genuinely become a "thing" in Perth and I am speculating heavily on it not, though I think it won't since our city extends some 120km with a terrible public transport network and few employment hubs.

 

Forgot to post this the other day. Basically fundamentals are not there, it's just speculators pushing up prices at this point. Yes I know iron ore has been pushed up to $80 range again today, look what happened recently when this happened.
As China punishes speculators, billions of dollars exit commodities

Just like the recent oil rally, which has lent some strength to other commodities, just speculation on a deal coming out of OPEC.

Yes US might have had a nice GDP reading yesterday but global economy is still pretty weak. A repeat of this new years correction

Multinational company revenues like Caterpillar are still on a downward trend and China's exports to the world are still downward as well. I will be convinced that its a sustainable rebound when the indicators I am looking at show me that.

Caterpillar Suffers Sales Losses in 3Q16 (CAT)


China October exports, imports fall more than expected


I suspect Perth's heavily mining dependent economy won't recover until this sustainable rebound happens and new mining investment starts flowing in , in a big way again.

 

Ah so it's ok for you to go over east and work but when "they" come over to your country you all whinge and carry on about it.
Have you noticed a difference in attitudes and culture where you are now?

 

Hi MTR, where are you getting your population data from? I'd love a good data source as the ABS data seems dated?

 

Welcome to WA

Oil surges 10pc as OPEC agrees to cut production

Perth property prices on the improve

Melbourne property prices slide, Corelogic figures show

 

This was reported on News 7 probably 2 months ago.
Google?

 

CoreLogic this morning reported that house values in Perth lifted by 0.6 per cent through November.

That followed a 0.7 per cent improvement in October.

Despite the solid consecutive improvements, house values overall over the past quarter are still down by 1.4 per cent and by 5.9 per cent for the year to date.

 

I still think that quote was a pithy one liner. According to ABS, W.A was growing by about 500 per week or 30,000 per year. I assume the vast majority of that would be perth based

3101.0 - Australian Demographic Statistics, Mar 2016

 

So in boom times significantly more ??

 

Actually on further thought @MTR

Those figures might be referring to net state migration and overseas migration and not account for natural population increase.

So yeah migration into W.A from eastern states has slowed considerably perhaps even reversed but W.A is still growing by about 500 people a week from natural increase and overseas migration.