Pete Wargent blogspot

Co-founder & CEO of AllenWargent property buyer's agents, offices in Brisbane (Riverside) & Sydney (Martin Place), and CEO of WargentAdvisory (providing subscription analysis, reports & services to institutional clients).

5 x finance/investment author - 'Get a Financial Grip: a simple plan for financial freedom’ (2012) rated Top 10 finance books by Money Magazine & Dymocks.

"Unfortunately so much commentary is self-serving or sensationalist. Pete Wargent shines through with his clear, sober & dispassionate analysis of the housing market, which is so valuable. Pete drills into the facts & unlocks the details that others gloss over in their rush to get a headline. On housing Pete is a must read, must follow - he is one of the finest property analysts in Australia" - Stephen Koukoulas, MD of Market Economics, former Senior Economics Adviser to Prime Minister Gillard.

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"I've been investing for over 40 years & read nearly every investment book ever written yet I still learned new concepts in his books. Pete Wargent is one of Australia's finest young financial commentators." - Michael Yardney, Australia's leading property expert, Amazon #1 best-selling author.

"The most knowledgeable person on Aussie real estate markets - Pete's work is great, loads of good data and charts, the most comprehensive analyst I follow in Australia. If you follow Australia, follow Pete Wargent" - Jonathan Tepper, Variant Perception, Global Macroeconomic Research, and author of the New York Times bestsellers 'End Game' and 'Code Red'.

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"Wargent is a bald-faced realty foghorn" - David Llewellyn-Smith, MacroBusiness.

Tuesday, 3 March 2015

Death of a thousand cuts

Mining boom unwinding

The absurd idea that the mining investment boom would go on for decades - even lifetimes - was tragically flawed, and although there appeared to be something of a second wind fore resources capex - partly driven by kahuna overruns - mining construction is now set to revert dramatically lower.

The Reserve Bank's chart packs showed that the surge in mining construction activity in concert with a ramping up of household debt allowed regional house prices to outperform inflation and household incomes in aggregate through the mining boom broadly from 2005 until 2009.

The uplift was driven largely by a borderline surreal boom in house prices in some Western Australian resources towns, but also mining-influenced areas in Queensland, South Australia, Victoria and New South Wales.

Only recently, relatively speaking, have dwelling prices in the Pilbara crashed, while Queensland's once booming Moranbah is now following suit.

As noted a couple of days ago, I expect Emerald will be the next of the 2012/2013 "hotspot" tips to go pop.

Now the Courier Mail reports that "Surat Basin towns are dying the death of a thousand cuts as miners leave in droves", with Dalby, Chinchilla, Roma and more small towns now set to experience the pain of the capex bust too.

From the Courier Mail:

"Locals say the main street of Dalby resembles a ghost town these days – a sad indication of a mining boom ending too soon for some.

Things have taken a turn for the worse since the glory days of the mining construction boom, with companies responding to falling commodity prices by pulling the plug on new projects and laying off workers across the Surat Basin.

The increasing exodus of workers, investment and money from the mining towns has left houses empty and businesses struggling, with many of those left behind wondering what to do next.

Di Reilly, owner of Mary’s Commercial Hotel on Dalby’s Cunningham St, said much had changed since 2013 when thirsty miners packed into the pub every Friday and Saturday night.

“We used to open the old bar up and the whole place would be chock-a-block,” she said.

Things were going so well that Ms Reilly began a revamp of the pub before the numbers tapered off, leaving her with a half-renovated bar and plummeting income.

The old bar now sits unrenovated and empty, a dusty reminder of plans gone awry.

“They were saying it was going to last 10 years but it hasn’t,” she said.

“I was going to do the whole pub up, so I was banking on it that they would be here a little longer than they were, but it just stopped all of a sudden. It just got cut off.”

The impact on her bottom line has been astonishing, with turnover last December down $100,000, slashed in half from the previous year.

One person assessing her future in the town is retail assistant Tina Henderson, who followed the mining construction boom to Dalby with her family three years ago.

She said successive rounds of redundancies had left her worried about her husband’s mining job and her older children were struggling to get full time work.

“It is much quieter now,” she said.

“I actually walked out of the shop last Saturday, looked up and down the street and thought: ‘Where is everyone?’”

Down the road, electronics retailer Colin Fountain speaks of the boom in the past tense.

“I’ve definitely noticed a slowdown. Sometimes when you look down the street you’d think you were in a ghost town,” he said.

Further west in Chinchilla, the effects of the mining construction boom have mainly been felt in the real estate sector, where rents and house prices doubled from cashed-up workers arriving in the town.

Long-term residents said many pensioners had been forced to leave because of high housing prices and now that prices had fallen some weren’t coming back.

One real estate agent said “a hell of a lot” of property was on the market – about 400 houses were for rent or sale and buyers were scarce.

But Bill Blake, secretary manager of Chinchilla Community Commerce and Industry and a mining consultant, said most economic pain was being felt in the real estate sector and the town had a diverse range of industries that would thrive despite the mining downturn.”

There will doubtless be plenty more such stories over the next 2-3 years as the resources engineering construction boom unwinds in full.