Good buy for a potential subdivision?? or not??

Freckle,

In case you hadnt noticed the WA RE boom ended a long time ago. And that is especially evident in the city of Mandurah, and has been for a long time. Mandurah has been one of the hardest hit cities/suburbs in WA over the last couple of years.  What year was it when people were camping outside the office of sellers offices? Seriously!?!

Property prices have been flat and in many places contracting for a many years i.e Mandurah, but to say that the resource boom is "really really" over is a major over statement! Statements like these sound like the scare monger tactics similar to something I would hear on "Today Tonight".  

There are lots of people who have lost money in the Mandurah property market but the Perth property market is doing better than it has for quite a few years. And the fact that mandurah and perth are only 70kms apart says it will only be a matter of time before mandurah starts to feel the effects of the uptrend in Perth.

I'm not sure what you define as a long time but Perths market has been fairly robust over the last few years. Basically the WA boom (although off its highs) was still intact in most places up until mid 2012.

From the Residex Blog

Perth is now clearly out of its correction phase as the impact of the resources boom has started to cause housing need imbalances (shortages). The graph ‘Monthly Trend Houses and Units – Perth’ presents the current position.

The growth now being exhibited in this market is very respectable and we should expect the rate to slow a little.

I'm not sure where you get your info from but it reflects a lot of the misinformation and hype I've been hearing for the past few years.

Once the mining expansion is complete about mid 2014 capacity in the Pilbara alone will reach around 800mt. The total global seaborn market peaked at 650mt. Throw in other global suppliers and you have in excess of 1000mt in capacity. So volume has to be rationalised somewhere and prices will invariably reflect the oversupply.

China takes 60% of seaborn cargos. In the last economic quarter China pumped US$1T into it's economy. 50% to stimulate and 50% to roll over NPL's (non performing loans). Japan and S Korea are other major consumers of ore but have economies on the ropes.

I don't think you need to be a rocket scientist to understand that this is not going to end well.

Oil and Gas. There is no follow on boom coming. The gas boom is over. Significant future projects have been canned or suspended indefinitely. Gas and oil represents little more than 30% of WA's resource economy. Iron Ore is the main game. Globally we have a gas glut and there are still some very big fields yet to come on line even though we are currently building 7 of the 12 global gas projects.

There is no CSG in WA it's a shale gas resource here and I just don't see that getting any legs as the US shale gas experiment is looking like a disaster in the making for them. CSG on the east coast only has to put one foot wrong and that'll be the end of that industry here.

Shell is trying to master offshore processing so I'm dubious about any foreshore talk.

I come from the logistics side of the industry. I saw the writing on the wall 2 years ago and last year thought it was time to bale before it was too late. A mate didn't agree and wanted to buy my gear. I told him he was crazy and should sell his own gear and downsize. I forward sold my gear to him at a good price. That was the end of last year. All that gear and his is now up for sale either on consignment or at the auctions. The sales yards are full of trucks, trailers and machinery. They're at the point of turning gear away because the volumes are difficult to move. My friend is chasing 3 companies for outstanding debt from last year. 

When I say there's going to be a 10% contraction in resource activity I'm being very conservative.

Mining canaries dropping like flies

Garnaut warns, BHP and Rio cut

China is in the middle of an economic transformation that will result in less infrastructure investment and much lower growth in imports of iron ore, other metals and energy, he says.

Australian policymakers need to make an “immense adjustment” if the country is to avoid a deep recession brought on by the end of the China resources boom, according to prominent economist Ross Garnaut.

“It’s going to be very tough and Australia will only get through that with a radically lower real exchange rate…Monetary policy is critical to this…

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The ANZ has produced the latest gloomy report into the approaching mining investment cliff in its semi-regular major projects report. This one is a doozy, more bearish than any before it:

MAJOR PROJECTS PIPELINE REVISED LOWER AGAIN: MINING AND RESOURCES INVESTMENT EXPECTED TO DECLINE SHARPLY FROM H2 2014

Easy come, easy go for LNG

Woodside Petroleum has ended talks with other owners of gas fields that could supply gas for an expansion of its $15 billion Pluto LNG venture in Western Australia, signaling another potential growth venture is on indefinite hold.

Woodside had gone quiet in recent months on prospects for a deal on third-party gas supplies. But the formal advice on Thursday that talks have ceased confirms that the possibility of an expansion of Pluto has faded and is now several years away.

“At present, there are no active discussions with other resource owners with regard to Pluto expansion,” Woodside said in its quarterly report on Thursday, which showed a 55 per cent leap in March quarter production from a year earlier.

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NAB's report: Will mining investment fall off a cliff?

http://www.scribd.com/doc/129026790/2013-03-07-Mining-investment-pdf

• Mining in Western Australia, together with the petroleum industry in the state, accounted for almost 90 per cent of the State’s income from total merchandise exports in 2008-09
• Western Australia’s mineral and petroleum industry, in 2009, had a value of A$61 billion, of which 48.2 billion were created by the mining industry.

Many expected the mining/resource boom to wind down to more sustainable levels however few really understand what this means. The info above merely talks about construction but there is another side to the contraction most aren't talking about and that's the cut backs to operational expenditure as revenues begin to fall.

• Rio Tinto is also in the middle of a belt-tightening exercise, looking to cut $5 billion in costs, including $1 billion from its exploration budget, by the end of next year.
• BHP Billiton boss Andrew Mackenzie used his first major investor presentation as chief executive this week to flag severe cuts to capital spending. He said the miner would cut capital and exploration expenditure by 18 per cent. Ominously for contractors banking on a recovery in mining investment, Mackenzie said BHP's spending would continue to ''decline substantially'' in subsequent years.

There are 3 dimensions to this contraction;

• falling state revenues as ore volumes and prices decline
• project cancelation or suspension and
• expenditure cutbacks in the face of falling revenues.

So for anyone who thinks things will muddle along ok and that any correction will be modest and manageable I say good luck to you but I'm cashed up and cashed out and heading for more secure pastures.