Rental demand 'renaissance' from mine workers to push up Perth property prices: ANZ

The “renaissance” in demand for rental accommodation in Perth from workers servicing the mining industry in the state is expected to trigger a recovery in the housing market, according to ANZ’s latest property outlook report.

Mining investment is also expected to boost the already strong Darwin housing market, while the report expresses concerns about the impact of failed mining projects in South Australia on confidence in the state’s housing market.

In the other mining state, Queensland, ANZ expects only those regional property markets directly linked to the mining boom - such as Gladstone - to feel the benefits.

The report, compiled by ANZ economists led by head of property research Paul Braddick, says that the WA housing market has yet to reap the benefits of the mining investment boom, with the weakness in house prices “only recently looked to be easing”.

“In contrast, the Perth rental market is experiencing a renaissance, with strong demand for labour driving an increase in transitory population (including fly-in-fly-out workers) and adding pressure to the existing rental stock.

“Rental vacancy rates have tightened to three-year lows, adding sharp upward pressure to rents.

“The resultant improvement in rental yields should trigger a recovery in the Perth housing market, particularly from first-home buyers and investors, and drive house prices higher in the second half of 2012,” says ANZ.

Its property outlook report also looks favourably on the Northern Territory, calling Darwin the “bright spot in an otherwise sluggish market nationally”, boosted by the initial construction phase of the $34 billion Ichthys LNG project, which it says has driven an “extremely sharp 230% increase in business investment in year-ended terms”

“The ramping up of the Ichthys project will generate significant demand for labour, leading to a pick-up in net overseas and net interstate migration over the next couple of years.”

Despite both South Australia and Queensland having mining exposure, the outlook is less certain for these two states.

“Cancellations and delays of a number of large uncommitted mining and energy projects [in South Australia], including the proposed Olympic Dam expansion and the Clinton project, have weighed on general business confidence and housing market confidence,” says ANZ.

In Queensland, ANZ says conditions in the housing market remain "highly variable across regions, reflecting the diverse economic conditions in the state. Gladstone house prices, for example, have risen a sharp 18% over the past year due to strong population growth as a result of a number of mega-LNG projects that are being constructed in the area.”

"In contrast, the Gold Coast and Sunshine Coast have witnessed further falls in house prices, as a result of sluggish conditions in their local economies. Brisbane house prices have fallen by 5.4% over the past year and remain 12% below their peak."

ANZ expects mining investment to expand to a record $60 billion in 2011 and is projected to more than double in the fiscal year ahead.

“Nonetheless, the fruits of the boom will be spread unevenly across states and sectors, with Western Australia, the Northern Territory and Queensland the major beneficiaries.

“The two-speed nature of the Australian economy will be exacerbated by tightening fiscal policy and continued strength in the Australian dollar, which will maintain competitive pressures on the manufacturing and tourism industries and weigh on retail and financial services.

“Without receiving a direct boost from resource investment, economic activity in south eastern states is expected to slow markedly.”

To find out what the mining boom will mean for property investors and where the investment hotspots are likely to be, sign up for Property Observer’s free webinar with hotspotting.com.au’s Terry Ryder on Tuesday, October 2 at 12.30pm

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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