WA in a Growing State of Optimism

It is refreshing to see the overwhelming support of local residents towards the City’s proposed $80 Million dollar Ocean Reef Harbour development with 95.6% of respondents being in favour of the development. The City is yet to advise the outlook for the inception of planning prior to any commencement of construction to start.

The proposed Arts and Culture centre for Joondalup is underway and is set to commence in 2010. The third project for the City will be the Edgewater Quarry development said to benefit the local residents and improve the aesthetic of the location. Capital spend in the City will also be more evident as new facilities in Joondalup are under way, such as the 9500m/2 4 storey building on Reid Promenade, the 192 unit development and the $17.7 Million car lot.

The study conducted by the City’s economists suggests a straight swap between private sector and Government spending. Production prices are said to go up with commodities base in an upswing. World Industrial markets have fallen and recovery is said to be patchy. Our economical exposure to Asia is increasing off the back of a stronger economy.

Projects underway are only 15-20% with some lenders not prepared to borrow more than 50% equity. The sentiment is still pessimistic about residential markets however the September quarter property figures (REIWA) suggest activity in the $500-$700’s properties and a increase in activity in the $700-$1’000000 properties. Properties under $500’000 performed lower than June 09 with a reduction in sales volumes. This change in first home buyer activity is largely due to the changes in interest rates rises, the changing face of affordability and the demand of first home buyer activity creating an incubator for price growth in this market.

The Recession is different to the 80’s and the 90’s in that in the 80’s oil shocks and runaway wage inflation with new residential construction now largely concentrated in the engineering, railway and urban areas.

The new resources boom could spark fears of faster rate rises than expected Shane Wright reports: David Hale, a leading economist predicts a new commodities boom could have the Reserve lifting rates to almost 8% very quickly, said to impact the home owners of Sydney and Melbourne whilst the incomes for people in WA and Queensland would soar. The Reserve is said to see sharp interest rate rises as a fear of another run-up in house prices, with Mr Battellino concerned that a boom in the resources field will fuel affected housing markets, such as Perth.

Anz’ chief executive Mike Smith warned that further moves from the Reserve bank could be a set back for the economy and urged the RBA to wait until after Christmas before it pushes ahead with its tightening policy.

The better than expected unemployment figures from the November update is equivalent to almost 250’000 people keeping their jobs but they will face higher interest rates. There are still more firms not putting on staff than employing them. The Reserve Bank took rates from their 3.25% to a more normal level with a quarter percentage rate rise at 3.5% earlier this month. The stronger growth will push inflation to a still low 2.25% over the next two years.

In articles published in The West Australian; Reserve bank governor Glenn Stevens declared, WA will be more vital to Australia’s economic health but it will bring with it greater risk due to increased dependence on China and India. Mr Stevens said the country’s long term prospects were good, with the resources sector and those States close to it. The share of the economy taken up by mining activity would grow financed substantially by overseas investment. Access Economics in its quarterly report believed unemployment will increase only marginally in coming months. Strong population growth have helped the State through the worst of the global financial crisis and will continue to aid to the recovery. Even tough it believes official interest rates will rise to 5%, by early 2011 this will do little to slow WA. Access believes the State will account for about 14.3% of Australia’s economic output within three years from just below 14% at present. Access expects inflation to pick up.

The Australian dollar regained territory opening to 92.25 to the dollar today.

According to ANZ chief economist Warren Hogan the fact that the Reserve was arguing it would “gradually” normalise interest rates meant it would not inflict quarter percentage rate rises on homeowners at every meeting in coming months.(as published in The West Australian) “ We think a gradual policy normalisation means periodic pauses in the rate hike process’ Mr Hogan said. “On this basis, we are not expecting another rate hike in December and given there is no meeting in January, the cash rate is now likely to remain at 3.5% per cent until February, Mr Hogan said.
Reserve bank governor Glenn Stevens addressing a John Curtin institute, set expectations the Reserve will lift rates to 4% by early next year.

Optimistic Michael Pascoe believes WA’s is positioned right for an opportunity to garner more commercial activity in Perth, more tertiary services and WA can capitalise on the opportunities ahead, whilst WA is going to outperform the rest of the country for a number of years. Mr Pascoe said, to what extend WA can capitalise on this opportunity depends on pricing and availability.

Housing approvals were mixed and fell 0.1%, with the sector dragged down by units and townhouses favoured by property investors. Andrew Tillett The West Australian reports. Approvals for private houses were up 3.1%. Kate Cambell The West Australian reports a report by QBE Lenders Mortgage Insurance and BIS Sharpnel said a buoyant mining sector would keep Perth’s property market rising in the short to medium term. QBE chief executive said he expected the median house price to rise to $505’000 in 2012, reportedly.

Canning Vale was the most popular suburb for first homebuyers in the three months to September with 183 properties bought. In September 2203 grants were approved compared to 1978 in August Debra Goostrey reports according to a Western Australian article.

First home buyers free up rental properties as Perth vacancy rate doubled to 4.8% (REIWA Sept figures) hitting a 14 year high. Many first homebuyers left the rental market during the first home buyer ‘storm’ fuelled by record low interest rates, REBA assistance funding and government handouts.

It would be reasonable to consider that, demand is likely to be felt by population growth, as a result of the resources boom according to a The Western Australian article earlier last month. Dr Ken Henry Treasury Chief said it now appeared Perth would be home to the nation’s current population of 22 million by 20250. Perth could have up to four million from its current one point six million.


This could mean a steady flow of properties being sold in high demand locations with relatively short days on market. A market fuelled by underlying demand. Growth could remain patchy with a renewed focus on the impact of our housing on the environment, the investment in more infrastructure rich development and a renewed confidence in WA’s economy.