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Perth Construction Boom; Land prices in Perth Boom 25% in one year.
Topic Started: 22 Oct 2014, 01:17 AM (4,454 Views)
Mike
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This thread is about the reasons why Perth is having a construction boom and what is driving this boom. I will talk about Perth, most of the data reflects WA but the majority of the construction is in Perth as expected.

In the June Quarter construction (residential building starts) in WA broke records http://www.perthnow.com.au/realestate/news/residential-building-starts-in-wa-at-record-highs-according-to-abs-data/story-fnhlgriw-1227091731413
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RESIDENTIAL building commencements in WA are at record highs according to data released by the Australian Bureau of Statistics today.


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At nearly 29,000 starts for the year 2013-14, housing starts are the highest level since 1989


Some like Jimbo and others say this is a result of changes in FHBG and Stamp duty, while we have seen an uptick it does not account for such a massive increase and some of those changes only came in on July 1st which is after this the dates of this data. That would also suggest construction for the September quarter will also be very strong which I will get to further down.

In the June quarter FHB accounted for 1900 out of the 7481 approvals in the June quarter. This is 25.4% of the market.

http://www.treasury.wa.gov.au/cms/TwoColumns_Content.aspx?pageid=13730&id=641

As I have tried to explain over recent months to no avil that it is upgraders driving the market. Who are these other 5,581 (7841-1900) people buying land and building houses, it is clearly not FHB.

Land prices are skyrocketing in Perth. In one year the median price of land has increased from $240,000 to $300,000 or a 25% increase from the September 2013 to September 2014. To put that in perspective it is almost double Sydney's price growth for house prices, which everyone is calling a massive boom.

Once again upgraders are buying all this land and not the cheap land. Plenty of cheap land around to buy. Quality blocks in good locations is what is driving the market. Low rates are not fuelling the low end supply, upgraders are buying and building now taking advantage of lower rates to build there new home prior to rates increasing in future years. You don't have to believe what I say the proof is in the data from multiple sources.

http://reiwa.com.au/The-WA-Market/Perth-Metro/

Im sure most of you who read my posts will recall me warning of the large construction getting under way in the upgrader market. Prior to this I warned of rapid land sales in the upgrader market. I have been warning for some time that the price band over $600,000 is where the activity is.

Bears will talk about falling Iron Ore prices, Mining job losses but they miss the bigger picture of what is happening. Yes those are factors and will have an influence but only a small influence on Perth. In the regions a far bigger impact. While Iron has been dropping like a stone, mining job lost by the thousands, land prices, construction and now house prices are all rising and in some categories are in a boom, unless you call 25% in one year not a boom, up to you.

While all this has happened WA has created thousands of Jobs and unemployment has decline or remained stable despite the mining sectors troubles. Was this a surprise, not to some of us. Clearly it is to some bears who hang of every bit of negative data.

So what comes next, rapidly rising land prices up 25%, construction levels at 25 years highs, house prices beginning to surge up 2.3% in the last month. What do we think we will follow over the next 6 months.

I am going to make this admission, I may have been wrong. I have underestimated the resilience of the WA economy and the strength of the construction sector. House price rises may rise further then I predicted and over a longer period. Early days yet. So yes my prediction of price growth ending in mid 2015 may be premature.

All the above data and everything we are seeing now is what I have seen with my own eyes developing over the past year, it is what is reported to me by many people in the industry. I still cannot get bricklayers for my project, well hopefully next week got a tentative booking depending on weather and if they get the previous job completed. I am now hearing it is a similar problem with many construction trades, everyone is flat out.

In my time of building/developing and buying I have not seen a busy period, which I warned about for months now. Now the data is catching up once again. Bears tried to tell me how wrong I was with great venom in there posts, only to be proven how wrong they are yet again.

As a warning construction and activity now is higher again or at least seems like it from my point of view then all this data from the June quarter. Things will only heat up from here. It is going to be a hot painful summer for the Bears.




https://au.news.yahoo.com/thewest/a/25265389/housing-record-hits-wa/

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Nonetheless, it will still be well above the recent track record, with Australian Bureau of Statistics housing finance data this month showing great demand.

The figures shows that in the 12 months to August, there were 91,943 housing finance applications in WA, the highest since the same period in 2007.
Edited by Mike, 22 Oct 2014, 01:33 AM.
http://mike-globaleconomy.blogspot.com.au/
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newjez
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Heard it all before Mike.
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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zaph
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Too long!
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Could be the back end of the building grants Mike.

Your upgraded comment ,could be dopes using super to leverage in also .

I dont doubt the numbers Mike, and feel sorry for you sometimes as people with nothing dont believe what you say when you talk property, I believe you on what you own and do with property as I see clown trolls attack me when I say I own something they never have or will, they go on the attack because they have nothing or are jealous, Like zaph, knows dam well what I have and own ,all documented over the years. But because he does not have 1/10 of what I did at his age, he gets stroppy about it. He gets up at 4.30 evrymorimg to pay off his brisbane unit, probably interest only, while I would have probably been onto my secomd Sydney property at his age. So I understand that bit Mike.

But where I don't feel sorry Mike, is your complete dismissal of reality going on around you. I saw a post from you the other day, cant remember exactly, but it was some silly comments reguarding something, totally dismissive of reality which I clearly remember thinking come on Mike.

So while I think your intensions are good Mike, I don't know how realistic you are. I remember reading your blog one time, would have been a year or even two years ago. From memory you seemed to have a fair grasp of the bigger picture, but here on this forum, it seems the other way around.

Perth's heading down the tubes, Mike. Jobs going, wages going too, rents dropping, vacancy rates off the richter, record overbuilding all at record low rates. The truth is, the circus has been and gone Mike, shops closing down,people going home, less people coming in.

Face it Mike, it was the biggest ten year mining boom in history for us probably. When over a short ten years, prices of iron ore went from around 5-10 dollars a tonne to $190, all on chinese counterfeit money.

Iron ore is now $80 a tonne Mike, like I said the party has been and gone, is winding down,fast. But you just don't get this, just will not except this, complete denial and refusal.

I own property too and have owned multiple property for near two decades, but I don't turn Into a rapid bull foaming at the mouth spriuking prices, only a completely ignorant fool could not see the full story. Probably hard for some with all the lies and bullshit constantly portrayed by both the government and vested Interests telling them how great things are when in fact they have never been worse.

But hey, do you really expect the government to tell the truth. Yeah the economy is in severe striff and people look to lose a lot on their homes as we have no answer to deal with cheap foreign labour putting us out of the game.

Honestly Mike, you don't think Perth prices are at risk of falling some way Mike ? I did say honestly Mike.

I should also add here, that this is where you lose much credibility Mike, by dismiss somethimg that is fact or real or a real threat as fantasy so quickly, same goes for Peter fraser.That is your biggest downfall Mike, Get a bit more realistic Mike and don't be so quick to dismiss somethimg that appears to be an obvious threat in your market and you might be taken more seriously.

Good luck Mike
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skamy
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A a nice dose of bear fantasy tales to start the day. Perth has has a bit of a slow winter but things seem to be going just fine, no sign of price drops at all. Where do you guys get this stuff?


Why do you keep claiming that people are gonna sell their homes on the cheap?

a)Builders prices for land and homes is rising there is a busy market with lots of buyers.
b) Unemployment is at 5% and unlikely to rise with all that building work.


Where do you think the stressed sellers are gonna appear from?

The most that could happen if confidence dips- is that the market slows and people de-leverage again for a while.

However, as Mike has shown you above that this is now increasingly unlikely.
zaph
22 Oct 2014, 05:39 AM
Too long!
Maybe too many big words and numbers for you too.

Long story short Perth will be just fine.
Edited by skamy, 22 Oct 2014, 11:20 AM.
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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zaph
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skamy
22 Oct 2014, 11:16 AM
Maybe too many big words and numbers for you too.

Long story short Perth will be just fine.
What is wrong with you people from Perth?
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zaph
22 Oct 2014, 11:22 AM
What is wrong with you people from Perth?
I reckon there must be something in the water.
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Mike
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22 Oct 2014, 06:50 AM








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Could be the back end of the building grants Mike.
As I said in the link and provided the data for the building grants, the numbers for the grants and construction do not add up. Construction levels are 400% higher then the approved grant levels. This shows us it is not FHBG leading the demand. FHB do not typically spend $300,000 on a block of land which is the current median price.


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Your upgraded comment ,could be dopes using super to leverage in also .

This could provide for some increased demand, I have not seen any data on this so would be happy to see any you can provide.

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I dont doubt the numbers Mike, and feel sorry for you sometimes as people with nothing dont believe what you say when you talk property, I believe you on what you own and do with property as I see clown trolls attack me when I say I own something they never have or will, they go on the attack because they have nothing or are jealous, Like zaph, knows dam well what I have and own ,all documented over the years. But because he does not have 1/10 of what I did at his age, he gets stroppy about it. He gets up at 4.30 evrymorimg to pay off his brisbane unit, probably interest only, while I would have probably been onto my secomd Sydney property at his age. So I understand that bit Mike.
Fair enough.

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But where I don't feel sorry Mike, is your complete dismissal of reality going on around you. I saw a post from you the other day, cant remember exactly, but it was some silly comments reguarding something, totally dismissive of reality which I clearly remember thinking come on Mike.

So while I think your intensions are good Mike, I don't know how realistic you are. I remember reading your blog one time, would have been a year or even two years ago. From memory you seemed to have a fair grasp of the bigger picture, but here on this forum, it seems the other way around.

Perth's heading down the tubes, Mike. Jobs going, wages going too, rents dropping, vacancy rates off the richter, record overbuilding all at record low rates. The truth is, the circus has been and gone Mike, shops closing down,people going home, less people coming in.


Whos reality are we talking about?

Ok lets talk about the mining boom ending? Construction levels in mining have been falling for along time now, thousands of jobs have been lost, some mining businesses have gone bust, Price of Iron Ore has dropped a lot.

So what effects has this had on Perth. Unemployment has remained stable or fallen as thousands of new jobs have been created despite still very strong population growth. Why is WA creating so many new jobs?

Ask yourself when Iron Ore peaked at close to some $200 a ton, why the did Perth Property Prices fall during that same year or soon after in 2011. If House prices are so linked why did house prices not shoot to the moon based on such massive incomes fuelling price growth. It did not happen as there is no strong link between Iron Ore prices and House prices. It is similar with the mining boom, yes there is an influence from people earning higher incomes due to the mining boom but is drowned out by the majority of people earning an income based on Perth wages, not FIFO incomes from the North. There is some influence but now where near as big as most of you think.

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Face it Mike, it was the biggest ten year mining boom in history for us probably. When over a short ten years, prices of iron ore went from around 5-10 dollars a tonne to $190, all on chinese counterfeit money.
So the Chinese use counterfeit money now, ok then. That shows your true colours. I think you should go tell the Chinese this, about you're new reality.

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Iron ore is now $80 a tonne Mike, like I said the party has been and gone, is winding down,fast. But you just don't get this, just will not except this, complete denial and refusal.
Explain to me how the Iron Ore price directly affects you and the price of property today. I know it affects the Government revenue, and they have cut 7,500 jobs already yet the Unemployment rate still declined. Even with thousands of mining jobs lost as well. Why?

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I own property too and have owned multiple property for near two decades, but I don't turn Into a rapid bull foaming at the mouth spriuking prices, only a completely ignorant fool could not see the full story. Probably hard for some with all the lies and bullshit constantly portrayed by both the government and vested Interests telling them how great things are when in fact they have never been worse.
You certainly are ignorant and no I don't believe you own multiple properties at all. If you had read my posts of the last few years you would know my prediction was for Growth to slow or stop during 2015 then followed by years of stagnation, low growth and possible declines. I have stated this many times, clearly you are just shooting from the hip with little knowledge to support your claims. I am evaluating this stance now as it appears activity is far stronger then I thought it would, I knew activity would still be good at this point but it is much stronger then I expected. Either I also over predicted the influence of the boom and its decline or other factors are driving the huge surge in demand and prices of land.

Quote:
 
But hey, do you really expect the government to tell the truth. Yeah the economy is in severe striff and people look to lose a lot on their homes as we have no answer to deal with cheap foreign labour putting us out of the game.
Economy in severe striff? The Australian economy is growing at long term trend rates, WA is still doing better then this. Unemployment in WA is 5%, nationwide 6%. You call this sever striff. I call that a good result, sure it can be improved on a national level but still not to bad at all.

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Honestly Mike, you don't think Perth prices are at risk of falling some way Mike ? I did say honestly Mike.
Yes prices can fall and they will in the future like at any other time in history, what is you're point. Prices can also rise a lot further prior to falling, or maybe they wont. If you had read my previous comments you would know I talk about price declines, stagnation and price growth. Typically a property market only grows 20-30% of the time, the majority of the time is spent treading water or small declines.

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I should also add here, that this is where you lose much credibility Mike, by dismiss somethimg that is fact or real or a real threat as fantasy so quickly, same goes for Peter fraser.That is your biggest downfall Mike, Get a bit more realistic Mike and don't be so quick to dismiss somethimg that appears to be an obvious threat in your market and you might be taken more seriously.

Good luck Mike


No I think it is you who lack any credibility, you did not research your topic matter carefully prior to posting about ME. Peter Fraser is also very honest and knowledgeable on this topic, you should listen to him.

People like yourself get to much tunnel vision, you see a mining boom ending, iron ore prices falling and assume it must lead to a bad outcome. Broaden your vision and look at the bigger picture, while mining is one important part of the economy, it is only one part of the economy. Some facts for you.

On a national level total mining activity and exports accounts for 6% of Australian GDP. The work force on a national level accounts for 2% of the work force, 6% if you include construction/engineering.

In WA total mining jobs including construction account for 10% of employment, note this includes total construction which includes residential and commercial construction. Actually mining jobs are only a fraction of this number.

On a national and state level you only need a minor increase in employment in the other 90-94% of the working population to offset any falls in the mining sector. This is why unemployment is not increasing rapidly.

Bears will talk about incomes and how high paid mining jobs are being lost. This may be true but we have no data that shows us those highly paid people are not finding new highly paid jobs elsewhere.

When you are dealing with an entire state or nation, you once again only need a small increase in income across the majority of the population to lessen them impact of any large loss of high paying jobs in a small fraction of the economy. This is why mining job losses affect regional towns so badly and not the capital cities.

So yes mining slowing down does have an impact but that impact is greatly reduced due to other influences of the much larger population who do not work in mining.
Edited by Mike, 22 Oct 2014, 12:25 PM.
http://mike-globaleconomy.blogspot.com.au/
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Veritas
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So, in summary, supply is increasing (at a rate not seen in 25 years) just as:

-the mining boom is ending.
- wage growth is slowing
-migration into the state is falling
-stock of existing properties in the market is increasing
-rents are falling
-the rental vacancy rate is rising strongly

And this is bad news for bears how exactly?

Posted Image

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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skamy
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zaph
22 Oct 2014, 11:22 AM
What is wrong with you people from Perth?
We like our humour dry and cheesy.
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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