Key regional centres will again be property growth stars in 2013 as mining boom far from over: Terry Ryder
Markets touched by the resources sector dominated capital growth performance last year, and 2013 will be little different.
Infrastructure development will again be a key influence this year, much of it related to the resources revolution, which is still very much alive and kicking goals.
The worst call of 2012 was the declaration of the end of the so-called mining boom. This spectacular misreading of a situation was headed by Federal Resources Minister Martin Ferguson, who was the 2012 recipient of my annual award for Goose of the Year, and exacerbated by attention-seeking bean counters like Deloitte Access Economics.
The race to be the first to call the end of the boom was inspired by the decline in world prices for commodities like iron ore and coal. People whose vision extends no further than the tip of their noses failed to consider the possibility that this might not be a permanent condition.
In fact, the decline in iron ore prices lasted only a few months. Having hit bottom in September, iron ore prices are now double those levels. December was a record month in the history of iron ore exports from Western Australia.
Meanwhile, major overseas entities – from India, Brazil and China, among others – are rushing to invest in Queensland’s new coal province, the Galilee Basin, and related infrastructure such as rail links, export facilities and accommodation villages. Current projects based on that region total at least $40 billion.
Also meanwhile, the 10 largest resources enterprises in Australia are gas ventures, and they’re all charging ahead with their expansion programs.
Meanwhile again, every day there are new announcements providing evidence that the obituary of the resources sector was prematurely published. Here are some from the first week of January:
- BG Group has borrowed $1.8 billion to advance its $20 billion Queensland Curtis Island LNG project;
- Arrium has shipped the first iron ore from Southern Iron through its newly expanded port at Whyalla;
- Atlas Iron has begun production of its Mt Dove project near Port Hedland;
- public submissions have opened for Arrow Energy’s planned Arrow Surat coal seam gas pipeline in Queensland; Gindalbie Metals has shipped the first magnetite from its Karara project through Geraldton’s port;
- the South Australian government says it has issued a record number of minerals exploration licences, with 977 now currently active;
- Chevron has made two new offshore gas discoveries of the north-west coast of WA to support its Gorgon and Wheatstone projects (two of the three largest resources projects in the nation’s history);
- and MacMines is planning the $5 billion China Stone coal project in central Queensland.
Have you noticed any of this, Martin? Still think the mining boom is over? Still hold to your loudly expressed view that commodity prices will never again reach the levels seen in the first half of 2012? Have you learnt yet to think before you speak? Alas, probably not.
I’m wondering also if BHP Billiton’s boy wonder Marius Kloppers has yet to disengage the panic button, which is the most-used accessory on his office desk. That 2012 frenzy of project deferrals is looking a tad silly right now.
Darwin was the runaway leader on rental and price growth among the capital cities last year because it was the one most directly impacted by the construction of the resources infrastructure. It will be so again in 2013, while Perth will join the party as well. Perth has already had the big rental growth – the price rises will follow this year.
Brisbane, having recovered from the declines of 2011 and the first half of 2012, is ready to show price growth again and will be greatly influenced by the state’s expanding resources sector.
But key regional centres will again be the growth stars. Most media commentary reviewing real estate last year and looking ahead for 2013 has ignored the regions. They’re doing their readers a disservice, because there were plenty of growth markets in 2012 – it’s just that they were outside the capital cities and escaped the attention of city-centric talking heads.
Expect more of the same in 2013.
Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.
For more, watch Terry's free webinar Regions vs capital cities: Where to invest in 2013