Property Clock Investor Opportunities in former Mining boom areas.
Recent statements from the Reserve Bank point to investor opportunities. But not necessarily by following the herd.
This week, as expected, the Reserve Bank left interest rates unchanged at 1.5 percent.
But, in the same week, it also produced research showing that we are close to the bottom of mining’s decline. This bodes well for Australia’s economy – and particularly the mining states.
The Bank forecasts for underlying inflation in 2016 are 1.5 percent and in 2017 it will be 2 percent. Most economists believe that we have now passed the low-point in inflation
One reason why the economy’s pace-of-growth is likely to pick up is the recent rally in coal and iron ore prices which has lifted the terms of trade – the prices Australia receives for its exports relative to what it pays for imports.
That prompted the Bank to tentatively call the bottom of Australia’s commodity price bust.
The Bank observed that coking coal contracts for the December quarter have settled at $US200 a tonne, which is more than double the September quarter benchmark price of $US92.50.
Coking coal prices are now up an astonishing 200 per cent from the early 2016 low, while thermal coal for power stations has more than doubled from its trough.
Iron ore spot prices have risen 40 per cent since the Bank’s previous statement .
The Bank also observed that the steep fall in mining investment over the past few years appears to be slowing and might be close to a trough.
As a result, some property specialists believe that those locations that have experienced drops in property prices are due to pick up. For example, Heron Todd White believes that Mackay, Perth, Gladstone and Darwin markets are at, or close to, their bottom.
With interest rates due to stay low across the country for the next few years and growth likely in once-unfashionable locations, some diamonds may be found in the rough.
To discuss how to finance your next investment property, click the button below to contact our Chan & Naylor finance specialist.