July 5, 2007 By WAYNE ARNOLD PERTH, Australia — The global commodities boom has been very good to the state of Western Australia and its capital, Perth. While the broad Australian economy has had some slow periods and property prices are rebounding, Perth has been humming.
Kris Thomas seems perfectly placed to ride along with the good fortunes of the city. Mr. Thomas, a 25-year-old native of Perth, is a computer programmer for an oil and gas company at a time when the industry cannot find enough skilled people.
But he is packing his bags and moving east to Melbourne, not because he does not have a good job but because he can no longer afford a decent place to live in Perth.
Mr. Thomas, who is single, earns 57,000 Australian dollars, or $49,000 a year. The average wage in Western Australia rose last year to nearly 56,000 dollars, putting it the closest to salaries in the largest Australian state, New South Wales, in 13 years.
“It’s nearly impossible to get something in Perth at the moment,” Mr. Thomas said. “Housing prices in Perth have increased heaps, but salaries haven’t.”
Perth — indeed all of Western Australia — is in the midst of what local newspapers call a housing affordability crisis. Home prices in the city jumped 46 percent last year and although they have slowed, they are still creeping up.
The median price of a home here rose to 455,000 Australian dollars ($390,000), just shy of prices in Sydney. That is as if prices in Houston began to rival those in New York City, or it cost as much to live in Lille, France, as in Paris. Housing in Perth now costs eight times the average resident’s income, compared with just over seven times in New York.
“It’s great news for those already in the market, but very difficult for first-time buyers and those trying to get into the market,” said Rob Druitt, president of the Real Estate Institute of Western Australia.
What is happening in Perth is a side effect of the global boom in commodities on exporting countries like Australia. While property prices in the United States and elsewhere have eased in many places after an extended wave of speculation, prices in cities riding the export boom are still heading upward.
They are rising, as well, in Asian cities like Hong Kong and Singapore, but young people there tend to live with their parents until they are married and can buy their own homes. In Australia, young people typically move out when they finish school, if not sooner.
With its warm climate, nearby vineyards and beaches, the Perth region has been something of a sanctuary for its 1.5 million residents, the antithesis to increasingly crowded Sydney and Melbourne. A city of suburbs, Perth was a place where one could still pursue the Great Australian Dream: owning a home with a barbecue in the backyard.
The scene in Perth today is in some ways a throwback to the gold rush of the 1890s; only the rush today is for copper, nickel and iron ore. Western Australia sends out $130 million a day in exports, and the big mining companies cannot keep up with demand. Roughly $58 billion in mining expansion projects are under way to bolster output.
There are not enough workers to fill those projects. Mining companies are so desperate for labor that they offer to let workers live in Perth and fly them hundreds of miles to work in the mines.
The pay and perks have lured workers from other industries. Plumbers and electricians are rare now in Perth. Restaurants and tourist places have cut back operating hours because of staff shortages.
“Anyone who can cook is going up and earning big money on a mining camp,” said Alan Langford, chief economist at HBOS Australia, a diverse financial services company in Perth.
The Australian government responded in May by lifting immigration quotas. Last year, Western Australia also started a nationwide advertising campaign, “Go West Now.”
There is a sort of east-west divide, with Western Australia’s economy growing 7 percent a year, compared with 4.2 percent for the country as a whole. The national unemployment rate fell last year to 4.8 percent; in Western Australia, 3.1 percent.
Huge fortunes are being made. Andrew Forrest recently reached the $3 billion mark, as higher iron ore prices swelled the value of shares in his company, Fortescue Metals.
People have stopped calling Perth a backwater. In the past, career-oriented residents who wanted higher-paying jobs moved east. “Now, that’s flipped around because of the resource boom,” Mr. Druitt of the real estate institute said. “It’s changing Perth from being a beautiful place to live to being also a great place to work.”
City planners are hoping to further revitalize the city by moving underground the rail line that divides the downtown area from trendier areas across the tracks. Using Potsdamer Platz in Berlin as a model, the city wants to lure singles and other professionals.
But for many singles, housing is out of reach. First-time buyers fell to just 13 percent of all home purchases in Perth last year. While the average wage in Western Australia surpassed 55,800 Australian dollars last year, the average mortgage payment kept rising, to a third of that.
“I just can’t get a loan for what I need,” Mr. Thomas said. “I’d have to get a crummy house.”
Escalating housing prices are reflected in rents. With vacancy rates below 1 percent, rents rose 27 percent on average last year, and landlords have been able to hold “rent auctions” for eager applicants.
Particularly hard hit are households earning less than 60,000 Australian dollars (about $51,000) a year, said Paul Pendergast, policy manager at Shelter WA, a community organization that advocates affordable housing. “It sounds great to talk about the boom,” he said, “but it’s not evenly spread. Anyone who’s not already a homeowner or not already working in the mining industry is suffering.”
Shelter WA and other critics accuse the state government of failing to release public land fast enough for development. Mr. Pendergast also criticizes the federal government for cutting money for construction of low-cost housing.
Some in the real estate business say the boom may be waning: The number of properties on the market has tripled and it can now take as long as a month to sell one. But prices rose 5.6 percent more in the first quarter, and economists say prices will keep climbing as long as the market prices of resources continue to climb.
“All the stars are still aligned for the Western Australian economy,” said John Garland, a real estate agent in Perth who has been in the business since 1965.
They no longer beckon to Mr. Thomas. He has decided to make a contrarian bet, head east and look for a two-bedroom apartment in central Melbourne. “When the mining stuff slows down in Perth in 10 years,” he said, “people will be more interested in Melbourne again.”
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