beware

Having been involved professionally in the property market for over 40 years and based upon my discussions with honest agents and observations predominantly in Sydney and Perth, I would urge some caution if you are considering paying current prices.

From my perspective Sydney prices are difficult to comprehend as they have continued to balloon. Everyone knows this cannot and will not continue. Where they track from here seems uncertain but further significant rises cannot be supported imo.

I believe Perth property prices have reached their zenith and the only way now is for a flat line followed by the bursting of the "bubble". The reasons for this is the unsustainable prices in view of the diminished earning capacity of the work force. This is exacerbated by two obvious things.

Firstly, the loss of so many fifo workers due to the completion of the mining construction phase with the associated lower wages for those tradies and professionals returning to Perth and interstate.

Secondly, I observe that many businesses are struggling. There are exceptions, however, as the spending capacity of the workers diminishes so, I believe will the market.

In West Perth for example, probably the epicentre of the Australian mining industry, the work force has dropped dramatically. I would guess around 30-40% since the peak of activity. The vacancy rate in West Perth is high with more and more retail shops and offices becoming vacant and taking protracted periods to lease or sell.

I observed that one of the attractive whole floors in Hay Street was available for lease (unsuccessfully) for over 1 year! The owner eventually decided to move back in recently.

I believe the second half of this year will see a downturn in activity in the real estate market both commercially and particularly residentially.

I will watch with ongoing interest.