The property market in regional towns like Geraldton WA have experienced sharp downward pressure, with rents and values having fallen significantly since the end of the mining construction boom in 2012. There were also initial concerns that the market would soften further as a result of COVID-19.
These concerns initially appeared well founded, when the WA State Government imposed lockdown measures that resulted in the closure of International, Interstate and even regional borders, resulting in supply chain interruptions, limitations on population movement across the State (which impacted local tourism travel), job losses occurred, and there was an initial pause in key business sectors as a result of shutdowns.
The measures imposed by the WA State Government have limited community spread of COVID-19 in Western Australia, allowing the economy and the broader population to return to normality, far quicker than in some of the Eastern States and certainly around the world.
Stimulus measures and other matters have resulted in improved economic activity in Western Australia and there is little evidence at this time of significant softening in the local property market as a direct result of the Pandemic.
The WA State Government recently announced a $27.1 billion infrastructure spend as the centrepiece of the recent Budget, which is aimed at maintaining momentum during and beyond the Pandemic. In addition, Government forward estimates show an expectation for budget surpluses of circa $1 billion for 3 of the next 4 years, only reducing to $363 million in 2021/22 before rebounding to almost $1.5 billion by 2023/24.
This positivity was also underlined by the most recent Budget announcement, which highlighted a $1.7 billion surplus for the 2019-2020 financial year, making WA the only State in Australia to avoid a deficit during the Pandemic.
Activity stimulated by a strong resource sector (iron ore and gold trading at near record levels), resilient agri business sector, positive effect from Government stimulus, activity in transport/logistics, and high demand for workers (resulting in population growth), there has been broader stabilisation (and even some signs of growth) in many of the key property sectors in WA, including demand for quality industrial assets across key regional towns, despite COVID-19.
it is evident that large businesses in the resources, construction, exploration and logistics sectors can no longer rely on a fly-in fly-out workforce, which previously supported operations, and included a relatively high proportion who flew to WA for work, however resided permanently in other States (or even overseas). This has (and still is) forcing many workers to move permanently to Western Australia to maintain employment.
This situation is having a positive influence on our residential market locally and to a lesser degree, the local industrial and commercial sectors, noting that in regional towns like Geraldton there are also positive signs after a difficult few years.
Looking specifically at the Geraldton industrial market, it is evident that demand for industrial assets has generally been very flat for several years, with rents and values falling sharply. Market conditions have now stabilised, with some increased buyer enquiry and a slight improvement in the value of prime assets. Secondary assets constrained by design or in secondary locations remain very difficult to sell or lease despite the cautious optimism currently evident.
The key to demand across the local industrial Geraldton market is improved activity in the transport/logistics, local mining/resources and agri business sectors. These local economic drivers are performing well, with the agricultural sector experiencing an above average season, enhanced by better than expected yields and high grain prices. Whilst industrial sales activity is still somewhat limited, there are indications that demand for larger logistic, fabrication and transport sites is stabilising, albeit the market is exhibiting a strong flight to quality.
Tony Gorman has completed work in Geraldton