It has been argued by some that Perth is a country town that long ago caught the mining bug and periodically because of this, it gets too big for its britches.
It could be surmised that now is such a time.
The confident cowboy swagger of us here in the West has reached John Wayne-esque proportions. Chewing a wad of tobacco and spittin’ on the street, buckskin pants tight in all the right places, hat jauntily tipped back, our faces bathed in pure Western Australian sunshine.
We fill the nation’s coffers with GST revenue.
Our State Treasurer swims in royalty payments the likes a wild west outlaw could only have dreamed of on their biggest payroll heist (yep I’ve watched a lot of old Westerns, forgive me).
House prices have bloated and ballooned, almost matching Melbourne’s median house price, with less than half that city’s population.
We historically wax and wane between feast and famine.
What is the off switch?
In the past the iron ore price dropping has been key.
Enough to even dampen the enthusiasm of our mining mega-salespeople.
Is this time different?
Well the iron ore price has dropped (predictably) this year and little seems to have changed in the residential housing market.
This is against a backdrop of Lithium and Nickel prices tanking (much like the West Coast Eagles hunting priority draft picks), with associated projects being shelved throughout WA.
Gold is still a shining light, with every exploration hole drilled in WA by a junior resource player suddenly becoming a “gold play”.
As the world goes to hell in a handbasket, gold is still the global store of absolute value.
Although we export 80% of our iron ore to China, they have slowed down on the building front, and now have historically high stockpiles of our rusty red dirt.
Iron ore prices have more than halved since the peak of $US218 a tonne on September 21, currently trading under $100.
So that’s it right?
The end of Perth’s residential market growth for another market roller coaster cycle?
Well I’ll let John Wayne answer,
“Whoa, take ‘er easy there, Pilgrim!”
There are other factors at play.
Perth property values have actually accelerated since the iron ore downturn began.
Strong population growth and dwindling property supply has driven this outcome.
CoreLogic data shows home values in the Western Australian capital have soared by 52.9% since the onset of COVID-19 in March 2020.
So while the population growth sustains and the inability to create new housing stock remains, the strong contention is at worst, we are in for a soft landing this residential property cycle or dare I even say it, a long sustained period of steady growth underpinned by real demand for housing that is separate to the mining cycle.
Whichever way you cut it the mining cycle is likely over its tumultuous peak.
BUT as sure as God made little green apples, we will keep digging holes in Western Australia; for iron ore, rare earth, gold and whatever else we can ship to foreign parts.
And, on top of that Perth is a beautiful, growing city that will continue to attract migrants from interstate and overseas.
Remember to walk like The Duke – you are in Western Australia, you’re allowed to swagger.
For tips on how to walk like you just got off a horse and more importantly, how to strike pay-dirt with your next real estate sale, contact me on 0417 99 23 24 or book your appraisal here.
Derek Baston
sales@bastonandco.com
