The Boom is Over – Long Live the Boom!

There has been a great deal of commentary in the media about the so called end of the resources boom. Like many people living in the suburbs of Perth, you may be asking the question, “What boom?”

It is true that anyone directly associated with the mining and oil and gas industries has done very well financially and WA has the lowest unemployment level in Australia. But, somehow the riches haven’t actually flooded the suburbs of Perth as expected and this has been reflected in the rather flat real estate market over the past several years.

Small business, and especially retail has been doing it tough over the past few years in spite of the massive wealth being generated by the oil and mining industries. This has been reflected in the lack of consumer confidence in the property market where prices are still around 10% below their peak in 2007.

The good news is that buyer activity has increased markedly since Christmas to a point where there are now fewer than 11,000 properties on the market in Perth, down from around 17,000 a year ago.

Due to a slowing economy and potentially rising unemployment it seems the Reserve Bank will again reduce interest rates by the end of the year, which will make buying a home more attractive especially in the light of rising rents.

Nonetheless, the future of the Australian economy is looking less rosy than it was a year ago. There are still plenty of resource projects in the pipeline, but as we have seen in the past couple of weeks with BHP, Woodside and now Fortescue Metals Group, things can quickly be put on hold, and people can find themselves out of a job at the stroke of a pen.

As far as the real estate cycle goes the supply demand equation (12,000 properties on the market is the long term average), is suggesting that it is as good a time as any over the past several years to be buying or selling.

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