Forecasting Perth’s real estate boom — how we unlocked the secrets to the future

Thursday, 20 January 2022 — Albert Park

[5 min read]

Dear Reader,

I have a mate currently living in Perth.

He travelled there from his home in Melbourne in March 2020 for a short visit to see his young daughter.

When the borders shut, he had to make a snap decision whether to stay or return to Melbourne.

Almost two years later, and he’s still there!

His mates packed up his apartment, loaded his car onto a train, and the move was made permanent.

It couldn’t have been a better decision.

Not only did he miss the long lockdowns in Melbourne, but he’s also been working in Perth’s real estate market and riding the boom in land values that promise to keep pumping for the remainder of the cycle!

Yes, Perth’s real estate market is going gang busters.

To date, the top 10 performing suburbs in Perth that have had the greatest gains are listed in the chart below.

Just take a look!

Capital gains of more than 50% in some suburbs! Average ‘days on the market’ before properties are snapped up by ex-pats and investors as low as six.

As you can see from the price tag, these are all premium regions.

But be assured, neighbouring areas will start to benefit from the ripple effect as the population increases.

And I’m confident it will.

Government spending is one reason.

Premier Mark McGowan has promised to pump millions into the economy ($185 million), attracting tourists and skilled migrants — doctors, nurses, secondary teachers, backpackers, etc…

He wants to promote WA as a ‘safe and welcoming’ destination.

International students will be offered monetary support for accommodation.

Millions will be spent attracting ‘blockbuster international events’.

This will inevitably induce population growth and that will spur land values even higher.

It’s all going to feed into Perth’s property boom that we’ve been forecasting over at Cycles, Trends & Forecasts since 2019!

Yes, you read that right. Back in 2019, we saw it coming — before the COVID-panic.

At that time, real estate values in Perth had been in a depressive slump for more than a decade.

Housing prices were lower than they had been 13 years previously.

However, I maintained that there was a massive boom to come — and it would start in 2020.

Here are a few snippets from a report I wrote to subscribers toward the end of 2019:

‘Perth is now approaching the bottom of its cycle. There are several indicators that a turn is ahead.

‘It won’t be this year, but by mid-2020 we should see a change…

‘High commodity prices will create enormous wealth. And history shows it will flow into the surrounding real estate market.

‘There are also some big infrastructure projects in the pipeline, including major upgrades to the road network and airport.

‘Because Perth is coming from such a low base — the rise in capital growth in the years to come could be very positive indeed…

‘…there is potentially a massive boom ahead in WA/Perth.’

Even when writing this against the backdrop of the previous decade — it was hard to see exactly how it would play out.

But analysis of Australia’s real estate and commodity cycle showed that the forecast was indeed solid.

The 2020 pandemic and COVID migration has merely inflamed the trend — and the boom in values has only just started.

Investors that acted on the information we shared back in 2019, would have put themselves in a great position to make windfall gains.

But that doesn’t mean it’s too late to step in!

The key to all of this is to gain a true understanding of the dynamics behind the real estate cycle that we teach over at Cycles, Trends & Forecasts.

It will help you to forecast the future as confidently as we do!

Click here for more information and start your journey towards wealth-making opportunities.

Regards,

Catherine Cashmore,
Editor, The Daily Reckoning Australia

In public policy, the cycles of learning and forgetting are very long. Napoleon attacked Russia in 1812. Three years later, the empire was wrecked, and he was exiled to Elba. It took 131 years for memories of the grim war to fade. Then, in 1941, Hitler tried it again. Four years later, Russian troops were in Berlin and the Führer was nothing more than a scattering of ashes and charred teeth.

Price controls must be the economists’ equivalent of a winter campaign in Russia. Always disastrous; they are among the things that fool some of the people all the time and the rest of them occasionally. Which is more than enough for most public policies.

Emperor, Diocletian, provided a ‘teachable moment’ in 301AD. His ‘Edictum de pretiis’ showed all the world that controlling prices doesn’t work. Goods disappear — making them more valuable, not less.

And in the US, it’s been 60 years since Richard Nixon had a short and comic go at price controls. Maybe it is time to give it another try?

We take it for granted that most economists are morons, corporations are greedy, and politicians lie.

Economists have their moments of clarity. Politicians sometimes tell the truth. But businesses are always greedy. 24/7. Just like consumers. And members of Congress. But it’s not every day that the Fed adds US$8 trillion in new money to the economy…and the federal government spends US$23 trillion it doesn’t have. That’s what has happened since the 21st century began. It’s probably not a coincidence that prices are rising now.

Dishonest prices

Another thing we take for granted is that if there is anything the Argentines don’t know about political corruption or financial hanky-panky…it is probably not worth knowing. So, we cast our eyes down across the broad, dark Rio de la Plata; maybe we’ll learn something.

In an honest economy, consumer prices should go down, not up. Corporations lower prices as they become more efficient and competition becomes more intense. From Global Financial Data:

‘Amazingly enough, the Nineteenth century was a period of deflation, rather than inflation. From the end of the Napoleonic Wars in 1815 until the start of World War II in 1914, there was no inflation in most countries, and in many cases, prices were lower in 1914 than they had been in 1815.’

Businesses only raise prices when they have to…or when they can get away with it. And in an honest economy they have neither the opportunity nor the need.

But now, consumer prices are rising at a 7% rate in the US. But business costs — as measured by the Producer Price Index — are rising even faster, at almost 10%. CGTN:

‘U.S. producer prices jumped 9.7% year-on-year in December 2021, to the highest level on record, according to figures released by the Labor Department on Thursday.’

Bear in mind, these are the rates after they have been tortured by the government’s statisticians. If they calculated price increases the way they did back in the ‘80s, they would show consumer prices rising at a 15% rate…and producer prices soaring at around 20%.

This leaves businesses with little choice. They have to raise prices or lose money.

It also leaves the deciders who run the government and print the money with a decision to make: stop inflation…or lie about it. Naturally, they choose to lie. Who’s to blame for rising prices? Not the people who control the money! No…it’s corporate greed. Supply side disruptions. COVID.

While all of these things have roles to play, they are like bit players in a bank heist. One drives the getaway car. One stands lookout. But the real work is done by the feds themselves — cracking the nation’s safe…adding trillions to the money supply…and spreading it throughout the economy via deficit spending.

Then, as prices rise, they try to ‘talk them down’ with Whip Inflation Now buttons…they accuse corporations of ‘profiteering’…and in their dumbest and most harmful move, they try to control prices directly.

Lessons from Paris, north and south

Here, as with the ‘sanitary passes’, France’s President Emmanuel Macron leads the troops into Moscow. It’s a ‘war’, says the little corporal.

Last month, he gave out the word that consumers can rest easy this winter; the government would prevent greedy energy companies from raising prices. This caused the shares of EDF, the large French electricity company, to go almost into free fall…the stock has lost a third of its value over the last month.

This too is straight out of the Pampas Playbook. Our colleague, Joel Bowman, now in Buenos Aires, comments:

‘Jeez...these people need to send a fact-finding mission to the Paris of the South!

‘Here, the populist Kirchnerista government subsidized utility prices for years as a kind of “brioche for the masses.” Unsurprisingly, their once sound infrastructure soon fell into terrible disrepair. Nobody wanted to invest, given negative returns. Ergo, no investment...

‘So, when rolling blackouts hit the city — around this time every year, as everyone cranks up the AC — the “Ks” revert to their old playbook, blaming the “evil companies” for price gouging, taking advantage of the poor.

‘Here’s a photo of my bimonthly electricity bill (below), from Edenor. That’s 2,431 pesos per two months. Even at official rates, that’s about $24...total. Unofficially (exchanging dollars for pesos on the ‘blue’ — i.e. free — market) it’s half that...or about $3/month.

‘Unfortunately, as the Argentines found out after years of price controls, subsidies and neglect, in the end, you get what you pay for. “No hay almuerzo gratis,” as they say.’

But wait. There’s a big difference between Argentina and the US. Different hemispheres. Different languages. And different money.

Maybe the financial laws that doomed Diocletian and the Argentines, don’t apply to us?

Stay tuned...

Regards,

Bill Bonner,
For The Daily Reckoning Australia