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The Mining Boom has Passed
Creagh Ferdinands, Mon 13 July 2015

One of Western Australia's top valuers, says an opportunity is emerging.
"I think there's less risk of buying into Perth today than buying into the Sydney market," says Gavin Hegney, of Hegney Property Group.
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"If you are buying in Sydney, you are buying into an emotive boom. In Perth, it's a classic case of confidence being below fundamentals."
The median house price in Perth is $545,000, according to reiwa.com, down $5000 from the March quarter. This contrasts with the booming prices of Melbourne and Sydney. Reserve Bank of Australia governor Glenn Stevens called the Sydney market "concerning" and in some cases "crazy".
But the Perth market is not without risk.
A report by forecaster BIS Shrapnel released last week predicted Perth prices would fall in the next two financial years, before stabilising in 2017-18. A slowdown in overseas migration to the mining states was one of the contributing factors.
Mr Hegney said the downside risk was limited.
"I'd suggest that whatever fall that's going to happen in Perth in the next 12 months, the fall will be larger in Sydney," Mr Hegney said.
"At some stage in the next 12 months it will be the perfect buying market in Perth."
Western Australia was formerly the fastest growing state, as an iron ore price boom attracted workers from interstate and overseas. This underpinned housing demand.
But net overseas migration into the resources-rich state has fallen from a peak of 56,291 in 2012 to just under 19,000 in 2014. Similarly, net interstate migration has dropped from 10,800 in 2012 to a negative number. Last calendar year, 400 people (net) left the western state and traveled east.
The high level of construction work commissioned during the boom has left an abundance of homes on the market. There are just under 14,000 houses, units and land for sale in metropolitan Perth, says reiwa.com, compared with 10,689 one year ago.
There is already evidence that some homes are priced below replacement cost – the cost of building a new home on a block – which is being seen in the market as a suggestion that the bottom of the price cycle is near. This also means that there will be fewer people building new homes, which should ultimately put upward pressure on prices.
Bankwest chief economist Alan Langford said West Australians should avoid "scaring themselves into a recession" given the iron ore and oil and gas construction boom did create long-term jobs maintaining and operating the facilities.
"We shouldn't trivialise those jobs that were created," Mr Langford said.
He said positive signs in the rural sector also bodes well, given much of the profit from the farms goes straight back into the local economy, which includes property purchases.

This article originally appeared on the Australian Financial Review

 

 


 

 
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