The impact the resources revolution will have on Perth's property market is unprecedented: Terry Ryder

Take a look at this number: 500,000,000,000. What does it mean to you? 

It describes the dollar value of projects happening or soon to happen around Australia, most of them resources related. There’s $200 billion in gas projects alone, plus massive expansion of iron ore mines, coal mines, rail links and export port facilities. 

I ask because I believe few Australians truly get the enormity of what is happening in the resources sector. Even fewer understand what it means for Australia. 

I think that’s because the numbers which describe the action are so big as to be meaningless. They’re unprecedented. 

The waters are further muddied by economists babbling on about a two-speed economy, oblivious to the reality that only 20% of the expenditure has happened – which means the bulk of the big money is still to be spent.

What does $500 billion mean?

 To try to give it perspective, it’s the value of 1 million Perth houses, based on the current median price. 

It’s the combined market capitalisation of BHP Billiton, Rio Tinto and Chevron Corporation. 

It’s more than the GDP of New South Wales last financial year. 

Much of the activity described by this number is focused on Western Australia, the state that’s leading the nation in everything that matters: population growth, employment growth, economic activity, retail turnover – and soon, I believe, residential property activity. 

WA is the state of the big numbers. There’s $20 billion tied up in one port expansion project. 

There $100 billion in just three gas projects, headed by Gorgon, Australia’s biggest ever resources development. Projects like these will soon make Australia’s the world’s leading LNG producer, overtaking Qatar. 

A project isn’t newsworthy unless it’s at least a $1 billion. 

The state’s economic output is now about 30% above its 10-year average, according to CommSec. 

And it’s not just resources. Agriculture is thriving, helped by a record grain harvest, tourism is booming, boosted in a 57% annual rise in visitors from China, and over a quarter of all construction in Australia is happening in WA, according to Deloitte Access Economics. 

The state government is on target to record, god forbid, a budget surplus this financial year. 

While the numbers are mesmerising, it’s the economic impact that matters. 

Gina Rinehart, apparently the richest Australia, will need at least 10,000 workers for her $7 billion Roy Hill iron ore mine. 

BHP Billiton has lifted it’s first-half iron ore production 23%, while Rio Tinto is spending $20 billion to boost Pilbara production 60%, and Fortescue Metals is trying to triple iron ore production in the next 18 months. 

This will created demand for tens of thousands of workers. 

The companies receiving the big contracts are expanding personnel numbers – companies like Downer EDI which has recently won a $570 million contract to provide services to the $2.6 billion Karara magnetite project and $700 billion in contracts to providing rolling stock to BHP Billiton’s expansion of its Pilbara operations. 

Contracts like these are creating such prolific business expansion that Perth now has Australia’s strongest CBD office market. New space totaling 160,000 square metres will come on stream this year, but analysts say it won’t be nearly enough because most of that is already pre-committed. 

The hotel market is thriving, and demand for industrial space is the highest in the nation. 

Perth was identified in a recent global survey by Jones Lang LaSalle as one of the fastest-growing cities on the planet. 

And Perth is where residential property investors should focus their attention. The resources revolution will create pressure on markets throughout the state, but locations like Port Hedland (median house price above $1 million), Karratha, Newman and Broome are already prohibitively expensive. 

Perth not only offers greater affordability but it’s where the major companies are headquartered and taking on extra staff. And it’s where many of the mine workers are based (the number of FIFO workers moving through Perth Airport is already at record levels and set to go higher). 

One symptom of the impending property revival is strong sales at the prestige end of the market. An off-the-plan buyer recently paid $10.86 million for a city apartment, a record for Perth.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

Photograph courtesy of Flickr.