Boom to follow year of uncertainty

By Terry Ryder, 17th December 2011

At some point in 2012 buyers will start piling into real estate.

First-home buyers, trade-up buyers and investors will collectively go “Oh my god, it’s time to buy” and start a fun run towards the market.

The catalyst that will spook the hibernating real estate herd will be a TV news item or newspaper coverage of a research report that records an upturn in values in the previous quarter.

The migration back to the market will quickly gather a momentum of its own. Media, which devoted 2011 to gloom stories about property, will switch their obsessive-compulsive focus to “the new property boom”.

People who spent 2011 living in fear of the Europe crisis, the affordability crisis, the cost-of-living crisis and the what-if-home-values-collapse-like-they-did-in-the-US crisis will rapidly develop a panic urge to buy real estate.

The fun run will turn into a stampede.

The what-if-the-worst-happens psyche that galvanized consumers into inaction in 2011 will be replaced by an I-don’t-want-to-miss-the-boom mentality in 2012.

Sadly, most will have already missed the best opportunities to set themselves up for capital growth.

They say you make your gains in real estate when you buy, not when you sell. That means buying when markets with future potential are at the bottom of their cycles.

In most cases around Australia, that means buying in 2011, not in 2012. By the time the research companies get figures that describe the upturn, write their reports and pass the good news on to media, the upsurge will have been gathering steam for six months or more.

In other words, most pack animals will miss the chance to be bottom feeders.

If I had unlimited funds and lots of time on my hands, I’d sign pre-Christmas contracts in the following 25 key locations: Gladstone, Toowoomba, Emerald, Mackay, Brisbane, Tamworth, Gunnedah, Muswellbrook, Newcastle, Sydney, Broken Hill, Bendigo, Ballarat, Warrnambool, Portland, Adelaide, Whyalla, Port Augusta, Ardrossan, Ceduna, Albany, Bunbury, Perth, Geraldton and Kununurra.

There are plenty of other good options but I’ve decided to keep the list to 25. They’re all places with affordable options and great growth prospects.

Some places stand out from the crowd of possibilities – Adelaide, for example. Sooner or later Australians will realize that we have three boom resources states, not two, with South Australia as the third.

The state has multiple billion-dollar mining ventures in various stages of planning or construction, headed by the $30 billion expansion to Olympic Dam.

Many of the businesses winning contracts from the big resources projects will be headquartered in Adelaide, taking on extra staff. Olympic Dam proponent BHP Billiton will also have a bigger corporate presence in Adelaide.

Many of the workers engaged to develop Olympic Dam, the copper mine at Ardrossan and other big ventures will live in Adelaide as fly-in-fly-out or drive-n-drive-out or float-in-float-out workers.

Whyalla and Port Augusta will also receive multi-pronged benefits from the Olympic Dam project and other resources ventures.

Brisbane and Perth, as I wrote in last week’s column, are poised to turn around the recent decline in their markets, with growing impetus from the emerging boom in construction related to the resources sector.

There are some compelling growth economies in the regions. And it’s not all mining-related. Key regional cities in Victoria, like Bendigo, Ballarat and Warrnambool, are beginning to thrive from business expansion, population growth and the ongoing development of infrastructure.

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