Posted on Wednesday, February 1st, 2012 in by Matt Garmony
Less than a positive economic forecast, a statement by the Chamber of Commerce and Industry chief economist, John Nicolaou has revised down his September 2011 economic growth outlook for Western Australia to 5.25% growth for the 2011 – 2012 financial year. Although he admits WA’s growth is impressive due to unprecedented investment in the resource sector due to Western Australia’s close links to Asia, predicted slower growth in China will reduce demand for WA’s export commodities. Mr Nicolaou has reiterated “Not all local businesses are experiencing growth. Many small businesses are continuing to do it tough facing poor sales, declining profits and rising costs. Other risks that may impede growth include the federal governments carbon and mining taxes creating further layer of uncertainty for small businesses.” This slower growth prediction is more positive than recent research by JP Morgan which indicated “Australia is vulnerable to recession in 2012 as he global economy deals with potential ramifications of the worsening European Sovereign Debt Crisis.” With JP Morgan chief economist Stephen Walters stating “The Australian economy was not as well placed now compared to the start of the downturn, given the nations physical position.” Although house prices in Western Australia have fallen, they are still relatively high when compared to the ratio to household incomes maintaining affordability issues for consumers and small businesses and Australia’s reliance on China’s growth as China takes approximately one quarter of Australia’s exports.
Recent data reported by the Australian newspaper indicated China’s trades surplus unexpectedly rose in December as its exports were surprisingly resilient however it’s imports slowed sharply indicating that China’s domestic demand may be weakening. China appears to be comfortable weathering the global economic slowdown however it is reported at times being close to recession which in China’s case means growth of less than 8% per year.
Locally the building industry remains weak even with recent rises of 8.4% in November following a 10% fall in October. Other uncertainties are occurring with a fall in the job vacancy rates in the later months of 2011 indicating that there is the potential for the unemployment rate to rise slightly in the months ahead. Australian Bureau of Statistics indicated between August and November 2011 job vacancies fell by 3.3% with a report in the WA Business News some days later indicating “ANZ confirmed it will slash hundreds of jobs over the next 6 months” in a bid to increase profit growth, the bank has identified cost cutting and efficiency improvements to drive profit growth.
The interpretation of the above by the licensed valuers and property consultants at Garmony Property Consultants are that on the commercial and industrial side of the Perth property market we will see continued subdued conditions apart from the office sector which should experience moderate growth in rental values which should flow on to market values following low vacancy rates in the Perth CBD office market which is flowing onto the fringe CBD office markets West Perth and Subiaco. Given the economic uncertainty, risk of rising unemployment and job security and increased costs of living, we will see a continued subdued market conditions for the retail property market as small businesses and larger retail operators experience a reduction in consumer spending. The industrial property market will remain steady in our opinion, particularly in the smaller properties and secondary industrial localities however astute investors will continue the steady demand for large securely leased investment properties.
With a wealth of knowledge across diverse property markets, the licensed valuers at Garmony Property Consultants provide our clients with detailed market and rental valuations and consultancy advice assisting our clients with their important property related decisions.