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Why there will be no crash in Perth; Perth bears have their fantasy smashed
Topic Started: 21 Aug 2014, 02:38 AM (43,315 Views)
newjez
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Jimbo
3 Sep 2014, 03:03 AM
Christ on a bike Mike.

Which part of not all capex results in WA jobs didn't you get?

I thought you worked in construction? Obviously not big stuff.

I am not going to spend hours trying to explain how a minesite goes from feasibility, to FEED, procurement and then construction.

If you want some free lessons, borrow a book or something.

As for my house sale, again, totally true.

Unlike your fantasy high powered construction job and your network of analysts.

FFS. Who starts their own economics blog, posts two bullshit articles on it and then links to that blog in their post footers?

"Oooh look at me, I'm an economist, I have my own blog you know." (with zero followers)

What a dickhead.
Bets on how long before Mike ditches the blog? I'd give it a week.
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
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Lef-tee
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It's true that not all CAPEX is job-rich. Last I saw, the bulk of the decline in mining-related CAPEX thus far has been in machinery and equipment imports. There are few jobs created by that. The jobs are mainly in construction which is only just beginning to decline.

Mining construction seems to have peaked at close to 4 times the size of non-mining construction (in QLD at least) so non-mining construction is going to have some rather big shoes to try and fill. In WA, the very low interest rates and the government-sponsored affordable housing initiative will surely help to offset the decline (maybe even some wealthy foreign real estate buyers, who knows?) but I remain skeptical that it will be enough.
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Jimbo
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Lef-tee
3 Sep 2014, 06:45 AM
It's true that not all CAPEX is job-rich. Last I saw, the bulk of the decline in mining-related CAPEX thus far has been in machinery and equipment imports. There are few jobs created by that. The jobs are mainly in construction which is only just beginning to decline.

The big WA miners (BHP,RIO and FMG) were spending big in 2011/12 on equipment procurement, much of which came from China.

Even equipment procured in Australia has a high dollar value compared to the local jobs it creates.

The equipment component of capex will fall back first simply because equipment/machinery is procured early on in the project life cycle.

Once construction gets underway on site, more of the capex dollars translate into wages as site work is labour intensive.

I have a mate who was employed on ground works at Christmas Creek and he is now back in Perth in new home construction. He is on less than half the money down here on an annual salary basis.

As well as the fall back in labour on site, there will be falls in supporting office staff in the EPCM's. Most of these staff are contract employees on very good hourly rates (PM's, Engineers, Doc Controllers, QC's, IT support, OH&S etc. etc.).

Anyone who knows resources construction will know that it is highly inefficient when it comes to using labour. You can't fart on site without someone having written a procedure on how to fart and you need a permit and pre start before you can let rip. All of this equates to a high level of support staff compared to the boots actually on the ground working. If you built a house like you build a minesite, houses would cost $2 million each to just to construct.




Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Veritas
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Mike
3 Sep 2014, 02:37 AM

Quote:
 
Why then is unemployment still so low, during this same time period house prices increased. It is not just interest rate cuts.


Unemployment is low but rising. It would be higher were it not for the fact that people are now leaving the state or not coming at all.

Quote:
 
The economy was booming in 2011, yet house prices fell. None of you can yet provide an answer.



That should have you really worried. Economy was booming and house prices struggled. Of course, the reason was twofold. First, interest rates over 250 bais points higher ( spent most of the year at 4.75%) Second, sentiment. Its always sentiment.

Naturally, as The RBA slashed demand for housing increased. But the monetary wad has been largely spent now and the falls will resume.

Quote:
 
Anyway I am happy to let time prove you wrong, we will watch and see how events unfold.

The most accurate prediction I will ever make is most Bears will still be here in 1-2 years time waiting....waiting....waiting for an event that never comes. The smart Bears will listen to the Wife and buy when it best suits you're life or family situation not due to some half wits on a forum and that includes me.


Taking notes from the Shadberg PR playbook? Funny, how people who rely on new entrants to the market to ensure that their investments deliver for them are always encouraging us to get in.
Property acquisition as a topic was almost a national obsession. You couldn't even call it speculation as the buyers all presumed the price of property could only go up. That’s why we use the word obsession. Ordinary people were buying properties for their young children who had not even left school assuming they would not be able to afford property of their own when they left college- Klaus Regling on Ireland. Sound familiar?

The evidence of nearly 40 cycles in house prices for 17 OECD economies since 1970 shows that real house prices typically give up about 70 per cent of their rise in the subsequent fall, and that these falls occur slowly.
Morgan Kelly:On the Likely Extent of Falls in Irish House Prices, 2007
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Jimbo
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Veritas
3 Sep 2014, 12:15 PM
That should have you really worried. Economy was booming and house prices struggled. Of course, the reason was twofold. First, interest rates over 250 bais points higher ( spent most of the year at 4.75%) Second, sentiment. Its always sentiment.

The thing with 2011 is it followed 2009/2010 when a lot of capex jobs were iced due to the high AUD and low ore price. As house prices were falling, even the pick up in ore price and the re-start of projects wasn't enough to kick up sentiment immediately.

I think Mike looks at everything in black and white. He expects a correlation between raw capex data, GDP growth and unemployment to translate to a nice neat parallel line on a house price line graph. If he can't see it, then it doesn't have an impact.

So according to Mike, house prices are not related to the economy at all because the economy was booming in 2011 but prices were falling.

Therefore, if the economy starts to fall back, he can see no impact on house prices.

The same with unemployment. If the mines lay off 900 people, he can't understand why there is not an immediate uptick in unemployment by 900.

He doesn't take into account that people migrate here for a reason. They don't come here to do the same job for the same money to buy a more expensive house. They come here for the big bucks. So when they read in the paper back home in NZ or Victoria that the party is over in WA, they are not going to up sticks and come here. So the 900 laid off from the minesite get jobs building houses for people who ordered them a year ago when the party was in full swing and there are not as many new arrivals to compete against.

457's applying to come to WA dropped 41% in the first half of the year. That is bloody massive by any measure.

Mike argues that 457's go home once they have finished their jobs and don't buy houses. The truth is that 457's come here to obtain permanent residency and most achieve that. Otherwise they wouldn't bother applying.

One other thing on 457 migration. As of next year, new 457's will have to pay all government school fees in WA so that could pretty much kill 457 migration to WA for anyone with kids.

http://www.mediastatements.wa.gov.au/pages/StatementDetails.aspx?listName=StatementsBarnett&StatId=7748


Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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skamy
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Veritas
3 Sep 2014, 12:15 PM



Unemployment is low but rising. It would be higher were it not for the fact that people are now leaving the state or not coming at all.




That should have you really worried. Economy was booming and house prices struggled. Of course, the reason was twofold. First, interest rates over 250 bais points higher ( spent most of the year at 4.75%) Second, sentiment. Its always sentiment.

Naturally, as The RBA slashed demand for housing increased. But the monetary wad has been largely spent now and the falls will resume.




Taking notes from the Shadberg PR playbook? Funny, how people who rely on new entrants to the market to ensure that their investments deliver for them are always encouraging us to get in.
Verita unemployment is not rising, a calculated seasonal modified figure changed.

The actual result for calculated unemployment remained at 5%

Everything you are saying is the same old nonsense that you have been claiming since 2012. House prices will never go back to those lows never. There are still some bargains at the top end of the market and further out of the city, but the Perth market is in recovery mode albeit at a slower pace than Melbourne and Sydney.

There will be no further crash in Perth, it crashed as far as it was going to go in 2008 and recoved a bit in 2010 and after another couple of poor years it is now in recovery. There will be many years of elevated home construction levels followed by whatever growth we can find in this huge resource rich State.

Take off the shit coloured glasses and look around you, Perth is a fabulous city and it is vibrant with growth and opportunity.

Don't you ever wonder why the doomers all spruik right wing solutions that benefit the rich and are adverse for the less well off eg removing ng, planning laws and environmental regulations and now attacking Keystart aligning themselves once again with big business/banking interests. The sad thing is that they will probably win on these issues, and the next generation will complain that they have lost all these good initiatives to help people into their first property.
Definition of a doom and gloomer from 1993
The last camp is made up of the doom-and-gloomers. Their slogan is "it's the end of the world as we know it". Right now they are convinced that debt is the evil responsible for all our economic woes and must be eliminated at all cost. Many doom-and-gloomers believe that unprecedented debt levels mean that we are on the precipice of a worse crisis than the Great Depression. The doom-and-gloomers hang on the latest series of negative economic data.
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Jimbo
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skamy
3 Sep 2014, 05:39 PM
There will be many years of elevated home construction levels followed by whatever growth we can find in this huge resource rich State.

And what will elevated home construction levels achieve?

Increased supply.

More empty rentals.

What drove prices up?

Poor supply.

Tight rental market.

Why do investors buy?

To take advantage of a tight rental market and increasing rents.

What happens when rentals start to empty out?

Less incentive for investors to buy.

What happens when you have more supply than demand?

Not rising prices, that's for sure.
Matthew, 30 Jan 2016, 09:21 AM Your simplistic view is so flawed it is not worth debating. The current oversupply will be swallowed in 12 months. By the time dumb shits like you realise this prices will already be :?: rising.
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Massive
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the news im reading regarding growth industries in WA following this housing construction period is in agriculture to deal with the next great shortage of the 2020's - food ... Fish farms being approved up north and more wheat, etc being purchased by chinese inland.. Many WA farmers are struggling currently with the high dollar and poor financing though, so something has to give by that time...

Its not a sector known for lighting a fire in the urban residential property markets however.
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Shouldn't this thread be titled " the Perth crash has already begun".

GFC- gigantic financial collapse , finally catches up with Perth.

Was only ever going to be a matter of time.

Only blind Freddy could not see it coming.

Only the deluded are still preaching how good things are.

Some have finally seen the truth, aka Timmy, some are yet too.

Investors will soon get sick of paying for a house for the next twenty or thirty years for somebody else to live in, subsidising their rent as rent prices drop and taking and holding all the risk while the tennant takes no risk and watches rents decline along with prices.

That 500k mortgage works out to be about $1,000,000 paid over an average 25 year loan.

When you throw in interest only loan terms, it works out more again. Was ok when wages and rents were doublling every ten years or so but that all over now. See how they go now with stagnant and falling rents for who knows how many years.
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Perth had its backbone broken last night, with the annilation of iron ore prices to five ysar lows.

From here, it only gets worse.

http://www.barchart.com/futures/commodities/ITI

Stay well away from Perth and WA , wait til prices decline to near the bottom, that could still be another ten or twenty years away.

I see some bears here, sorry to pick you out count, that say things like we will see a downturn for a few years, or it will be a few years before things improve.

Tell me this count, what miracle will surface that will cure this complete fuck up of society over the last forty years through the mindless amounts of debt taken on.

How can we deal with cheap asain labour count? Will our wages match theirs in three years time ? Will theirs be $17 , will theirs rise to $8 an hour and ours come down to 8$ and hour. Yes the dollar may drop , still makes no difference when their wages are so cheap. You could cut our wages in half tommorow , and we would still be priced out of the game. If we dropped our wages in half tommorow, they would still be more than US wages.

And the other thing is, all our jobs being taken by rapid advancements in technology, computerised and automated systems.

I am over forty now, but I remember discussing the barcode on products with my dad in primary school. I also remember when in high school, he was asked to write an article about computers in the future for computer magazine I think it was. That was 25-30 years ago , anyway about the barcode, my dad said that one day they will just scan the item on a machine and the price will come up. I did not think much about it at the time, but its interesting to think about it now. If you wonder where I get my genius from Peter, its in the blood, not to mention when talking about the future.
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