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PIR Property Newsletter
16 November 2009
...From the PIR Team...
WA set to boom again...
The major news here in Western Australia (WA) is the recent go ahead of the Gorgon LNG project – Australia’s largest trade deal to-date. The AUD$50 billion deal to supply China with LNG from the WA north-west coast will provide indirect employment for up to 10,000 people at peak construction. The gas field they’re tapping into contains about 40 trillion cubic feet of LNG – that’s enough to power a city of 1 million people for 800 years!
With the Gorgon project expecting to commence production in 2014, the AUD$12 billion Pluto LNG project underway and due to start producing in 2011, plus Chevron’s Wheatstone and Woodside’s Browse and Sunrise LNG projects all planned to go ahead over the next 10 years, Western Australia is going to be booming again. And we haven’t even started talking about the iron ore or other resources projects... This news has already had a positive effect on office space in the CBD (Central Business District) with sublease space being withdrawn from the market and rents predicted to rise.
To view a list of scheduled WA major resource projects, click here... It's a very impressive list.
Our proximity to China with its current growth confirmed at 8.9% and expected to continue at the same rate next year, means Australia is definitely placed in an excellent position to recover from the current economic conditions and profit from our resource rich country for many years to come. As the RBA has shown by starting to raise the cash rate!
RBA vote of confidence for the Australian economy
The big news across Australia the last couple of weeks is that the Reserve Bank of Australia (RBA) raised the Reserve Bank Cash Rate by 0.25% on October 6, taking the cash rate up to 3.25%. We were the first country to make this positive move. The second increase of 0.25%, effective from November 4, makes the official rate 3.50%.
This step by the RBA is the start of the removal of ‘emergency’ rate settings and the first increase in the cash rate for 19 months (since March 2008) and lifting it from its 49-year low (February 1960) of 3.00%. This is the first change since the rates were last reduced back in April 2009 after six rate cuts reduced the cash rate from 7.25% to 3.00%.
These recent increases are based on the RBA substantially upgrading their view on the Australian economy. It now expects economic growth to be close to trend while inflation is ‘close to target’. The RBA media release provides their rationale for the latest decision.
We are currently in discussions with all the major banks regarding new commercial property loans and it is very encouraging to see that a couple of the banks are actively looking to increase their share in the property sector. This is good news for private investors as it leads to competitive pricing from the major banks!
The Feature Articles in this Newsletter show that
- The upcoming WA resources boom is not just news in Australia, but has made the UK news as well,
- Chevron has found more gas off the WA coast ,
- Nearly AUD$150 billion of Gorgon’s LNG was sold to Asian buyers in September,
- The Australian jobless rate is expected to peak at 6.8% by June 2010,
- Australia has held off a ‘technical’ recession and recent indicators are pointing towards ongoing improvement in economic conditions,
- Perth’s office property market has been given a confidence boost from the Gorgon Project announcement, and
- Falling property values are reaching the bottom with yields still between 8% - 9%, however they are expected to start tightening again next year.
For more detail , please read the full articles below...
Feature Articles
Perth gears up for another mining boom
– The Telegraph, 25 October 2009
Ripples form China’s stimulus have reached the shores of Western Australia and sent commodity prices leaping. Investment is pouring into the region in the form of billion-dollar new gas and gold mining projects...
Perth is in a phase of healthy recovery, having suffered less from the downturn than originally feared...
Chevron finds more gas off WA coast
The West Australian, 19 October 2009
Chevron has made a major discovery off the WA coast that will support its Gorgon project and is investing hundreds of millions of dollars on exploration and drilling.
Gas Deals in Asia
The Journal of Engineers Australia, October 2009
Chevron has signed binding agreements worth more than AUD$70 billion with Japan and Korea to export LNG until 2039. This is in addition to the AUD$50 billion China deal and a AUD$25 billion deal with India.
Jobless tipped to peak below 7%
The West Australian, 18 October 2009
The Australian jobless rate is expected to peak at 6.8% by June 2010 – substantially less than the 8.5% by mid-2011 as predicted by the Government in the May budget.
RBA statement on monetary policy
St George Bank, 6 November 2009
The minutes from the Reserve Bank of Australia (RBA) last meeting carried a relatively upbeat tone and note that the economy is continuing to expand...
Market Update
Gorgon lifts Perth’s office prospects –
The West Australian, 26 August 2009
The forecast is one of demand for office space, driving vacancies to tight levels again by 2012 and pushing rents back up. Rents would increase because proposed new buildings were not being financed, creating a credit-induced building lag
Commercial Property Rebounding
The West Australian, 4 November 2009
Analysts are predicting a bottom for property values in the coming months and with yields still trading in the 8% - 9% range, investor interest has been sparked.
Current Opportunities –
Whether you're in the market for a AUD$5 million industrial property or a AUD$50 million high rise office building, Property Investment Resources is able to source the right property to suit your needs. Our expertise in negotiation and due diligence ensures you invest in a solid property with a solid tenant.
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Call Andrea Maguire or John Reidy-Crofts on +61 (0)8 9443 9985 to find out more about our services or to ask any specific questions...
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