There is a degree of uncertainty in the real estate market in the western suburbs at the moment. The sentiment is the result of a number of forces.
The six successive interest rate rises that occurred earlier in the year eventually took a toll. So too did the negative impacts surrounding external events such as the recent dramatic fall in housing prices in the US, and to a lesser degree, the problems in Europe associated with the struggling economies of Greece, Spain and now Ireland.
More importantly, the announcement by the Federal Government of the introduction of a proposed “mining tax” severely affected confidence. In fact, at an anecdotal level, that announcement virtually stopped sales overnight.
Since then we’ve had the Federal Election, and the uncertainty that surrounded that result. We’ve also had the coming together of a coalition of sorts between the ALP, the former National independents and the Green Party. How that myriad of interests impacts on the mining tax is anyone’s guess – further contributing to the uncertainty.
Despite these negative forces at work, it is perhaps worth considering that Western Australia still has a lot going for it (one only has to look at the number of cranes around the place to get a sense of the progress here).
Firstly, the Australian banks have been far more conservative than their American counterparts in loaning money over the past few years. Where the Americans had few checks and balances, we had many, making the prospect of a dramatic correction in the market, less likely.
Secondly, the West Australian economy is very much driven by what the demand for resources in China and India rather than what is going on in Europe or America. And mining tax or not, that demand appears to be insatiable.
Finally, Western Australia already has over 150 billion dollars worth of projects scheduled over the next 20 years. These projects require workers and management and infrastructure and services.
There can be no doubt that there have been several forces at work affecting confidence in the West Australian real estate market in recent months. However, given Western Australia’s enviable situation – conservative banks, isolation from Europe and America, $150 billion worth of projects in the pipeline over 20 years – it is perhaps worth reflecting on all the positive things we have going for us when making real estate decisions.
Jamie Harrington
Director
Altus Real Estate