Massive resources industry spend certain to affect the property market

9/05/2019

Massive resources industry spend certain to affect the property market
It seems extraordinary – but it is distinctly possible that WA’s mining boom could happen all over again!
 
2014 saw the end of WA’s most memorable property boom that was driven by massive spending by the mining industry on mine site expansion and large scale construction.
 
The ‘mega spend-up’ is going to happen again as mining companies have recently announced coming projects to take place in the Goldfields and Pilbara regions totalling $75 billion.
 
This massive amount of spending on infrastructure and mine site expansion comprises of projects related to Iron ore, Lithium, Liquid natural gas, Mineral sands, Gold mining, Urea production and a Nickel smelter.
 
As these projects get underway there will be an enormous demand for workers.
 
Already, the demand for skilled professionals has risen dramatically and it is interesting that it is leading to an increase in tempo of top end property sales with median prices of up-market localities experiencing substantial gains.
 
The western suburbs have fared nicely as also has the Canning Riverside suburb of Mt Pleasant. Mt Pleasant has undergone a 26% increase in its median price over the 12 months to March 2019.
 
Needless to say, those people who bought while the prices were low have fared very nicely indeed and there is little doubt that over the next few years they will experience even more capital growth.
 
According to reports, some 40% of Perth suburbs experienced price growth over the year, March 2018 to March 2019 and to our way of thinking this point in the property market represents opportunity.
 
By contrast to the 40% that had increases, quite a few suburbs – particularly those in outer areas have undergone decreases in the median price because supply has consistently exceeded demand.
 
The question arises, how long will it be before they too do a turnaround?
 
The reality is that the mining industry’s current demand for professional workers will be followed by a massive demand for trades people and semi-skilled workers.
 
This is going to lead to an influx of people, a major increase in business confidence and as a result, rental vacancies will decrease markedly to follow a similar pattern to the previous mining construction boom.
 
This will be followed by the property market strengthening across the board and as a consequence, it seems to us that 2019 represents a golden opportunity for people to buy in areas where prices are at their bottom point.
 
A key point for investors to note:
 
If the Federal Labor Party wins the coming Federal government election we can expect them to take action on negative gearing in the 2020 budget.
 
The point to note is that the Labor Party intends to allow negative gearing to apply for established homes purchased before its budget. From then on, negative gearing will only apply on new property purchases.
 
With the thought that timing is everything, - i.e. the conjunction of the new resources industry construction phase and the Labor Party taking government, we are making a point of watching the prices of established suburbs that we believe have strong investment potential.
 
These investments will have excellent rental potential and qualify for negative gearing.
 
This stage of the West Australian property market represents opportunity and we would urge prospective buyers to act soon rather than leaving their move to the point where everyone is trying to get in for fear of missing out.
 
FOMO – the fear of missing out is not here yet – but it will be. It is hard to know exactly when but with the market clearly at its bottom point and numerous suburb prices edging upwards,   2019 seems very likely to be ‘opportunity year’.
 
If you’re thinking of making a move, be it as a home owner wanting to upgrade to a bigger home or different location, a first home buyer entering the property market or as an investor call us for a chat.
 
We have an excellent array of listings to present to you and a property management team regarded as among the best in the business. We’re geared up to help you make the most of the opportunities that will arise.
 
Footnote:
 
Our Property Management Department handled 18 new property leases in April.
 
While this figure is below what we have achieved in past months when you take into account Easter, ANZAC Day and school holidays, it was another outstanding achievement.
 
Our Property Management system differs from that of other agencies and is proving time and again to be highly effective for finding good tenants for our property management clients.
 

Richard Stacey
Principal/Licensee
Direct: (08) 6324 3601
Office: (08) 9414 9055

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