So…Is the mining boom over like economists say?

My understanding of the widely reported publication from Delloitte access economics is they have made an assessment on when they expect the continual flow of new project announcements to dissipate within a couple of years. This view is synonymous with what we are also hearing from some of the mining giants like BHP and Rio Tinto.

What the widespread publications of this report outline to me, is that as investors, we need to read the facts, not the headlines and also look beyond the article too. I have had a number of comments made to me saying “did you read? the boom is over”! My response is usually accompanied by a chuckle as I realize how people continue to take small, misconstrued headlines and pieces of information and make decisions based on them.

If for a moment we thought that the continued commitment of multi-billion dollar capital expenditure projects was going to be around forever, we really weren’t thinking into things too much. The level of financial commitment by large, medium and small mining companies over the last couple of years has been unprecedented and will continue to be for another two years let’s say. Should some proposed projects not be committed to like the Olympic Dam mine in South Australia, or the $20 billion construction of the outer harbour at Port Headland from BHP we should not start to say the boom is over.

What the boom is to an economist isn’t exactly what a boom is to a property investor. The economists are counting the continued financial capital expenditure commitment as their “boom”. As property investors our “boom” is seeing these large projects come to fruition and putting long term demand on housing in regional hubs throughout Australia. That “boom” is long term as a result of the short term “boom” that the economists look at.

There are three main reasons that it was always expected the boom in commitments was short lived:

1        1.    Access to capital funds and exposure from the funding market to one industry.

2        2.      Access to skilled workforces to bring the large amount of projects to fruition within a relatively short time frame.

3        3.       Increased costs of construction due to the boom in demand for labour and materials in a relatively short time frame.

I believe that in 5 to 6 years we may see another boom in capital commitments. This will be after the above three factors have all eased a little bit. In the meantime, for property investors, your time frame must remain long term and your desire to jump in with the crowd must be restrained  otherwise people will pay above the odds and will not see good yields on their property or good capital growth, so you may as well invest in a capital city.

My next blog will be about investors hype and the danger everyone is putting their selves into with the tunnel vision a lot of investors seem to invest with. Property investing is about strategy, not just buying property. If you really want to be successful at this, it is time to be smart.

Until next time, good luck with your property investing!

Josh