How Has the Mining Industry Affected Australia’s Real Estate Industry?

Looking at the Australian property market we could classify it into two eras;
before and after the Second World War.

Up until the beginning of WW2, Australia’s economic growth was heavily dependent on agriculture, which however experienced great financial hardship during the Great Depression between 1920 and 1930. Many agricultural businesses started to struggle when investment from overseas fell behind economic problems offshore.

War Cost and Financial Depression

The Australian property market was heavily dependent on foreign investment in the early 20th century. This became troublesome for the economy because there was a significant difference in the expected profit and the actual profit with respect to the investment. The overall situation got worse when the war started as the government needed to invest most of its capital to the war effort, rather than using money to correct national financial problems. These wartime measures provided the basis for rapid economic growth in the period after 1945.

Post War Reconstruction 

After the end of Second World War in 1945 the entire phase of the economy started to change. One of the main effects of the war was to start the 'migration revolution' of post-war Australia. Migrants from traditional sources were not available in large enough numbers so Australia started accepting refugees and displaced persons from the northern and eastern European countries. This added an extra boost in the population and thus the economy.

Australian Government had largely funded the war effort from domestic sources. Post-war economic re-construction was also aided by a decisive policy of national development pursued by the Australian Labor Party. Developing new markets for consumer products, high employment rate, increasing foreign investment and growth of mining industry soon made Australia one of the most developed countries in the world. Given the need for more skilled workers, Australia’s immigration policy was quite liberal during this period and the number of immigrants coming in has increased ever since.

The Boom In Mining Industry

Today, things are once again starting to pick up after a period of rather sluggish economic activity. Australia’s mining sector has been hailed as a saviour to the economy, protecting it from the effects of the severe economic downturns experienced in the USA, Europe and other countries during and after the global financial crisis of 2007-08. The mining sector currently contributes around 8.5% to Australia’s GDP (total output), and employs around 2% of the workforce (about 220,000 people). The biggest impact the mining sector has is on exports - in recent years it has made up over 50% of Australia’s total export earnings.

State governments are financing education and getting behind the trades sector in an effort to encourage the training of skilled workers, which means that there is a great demand for human resources. 

Mining Vs Real Estate 

The real estate sector also has a bright future because of Australia mining industry. It is estimated that 20% of economic growth in recent times has come from the mining industry. So more and more people are spreading to mining industry and this is creating more job. Hence the demand of establishing residential home is also increasing. The Western Australian government is sponsoring foreign immigrants to settle in Perth and surrounding regions to help cater for this. But the economists also have predicted that the real estate may take over the mining industry in Australia in the upcoming years.

Further, the price of real estate has almost doubled in Western Australia because of this mining boom. It can be easily said that real estate business will become one of the major players in the economic growth in some places of Australia. So the need of skilled real estate agents will also rise in those regions. It is a good time for young people who want to build their career in real estate industry to train themselves. Many educational institute like REET offers real estate agents license qualification. Today’s competitive world the value of education in any sector is priceless and we all know that.

Image Source: watoday.com.au,propertyupdate.com.au

Rising Prices in the Housing Market

The economy has continued to correct itself following relatively low levels of activity for some time now, and experts are predicting that the housing market is on the verge of seeing a considerable upswing. Recent increases in real estate prices are seemingly here to last for the foreseeable future, in fact, prices are likely to increase further. As a result, demand is increasing steadily particularly in Sydney and Melbourne, and other cities will be following suit and potentially booming very soon.

Not surprisingly, investors are looking to pump more money into the housing market to take advantage of the opportunity. Because prices are almost certain to increase, it is an ideal time to buy, particularly for first home buyers that will find it much more difficult to afford the same properties when the market is running hot. These price increases can have negative effects too.

Sydney and Melbourne in particular might already be booming. The auction clearance rates are 90% and 80% respectively, so the wide majority of homes are being sold quite quickly and without too much trouble. In fact, house prices have increased by around 5%-6% in these cities over the past quarter, a fact that has economists worried that these increases will continue to rise at such a rapid rate.

While this is great for investors and other people who are thinking on how to start in real estate industry, it makes affording property much more difficult for the majority of the population. Plus, Australia’s house prices are amongst the highest in the world on average around 20% more expensive than overseas homes. So there are potentially big problems that could come from increased demand and higher prices in the future.

Why is it that Australian house prices are so much more expensive than they are in other countries? Some economists believe it to have to do with lifestyle, more than it has to do with investment. Australian people have aspirations to own property from a young age, despite feelings that more and more people rent until they have a well established career and are possibly starting a family. What this means is that we are more willing to part with large sums of money because owning a home is a lifestyle choice, as much as it is an investment. While an investor would look at the price purely from a financial point-of-view, the average Australian does not necessarily.

We will be closely watching the property market over the next few months; it will be interesting to see whether these huge levels of growth continue for the remainder of the year and into 2014.