Now, in my mind there are two types of booms and we have seen them both occur. The first is what we call a ’Hype Boom’, and the second is what we call a ‘Real Boom’ and you can make money from both.
A hype boom generally comes off the back of a major infrastructure announcement. For example, in Darwin, in 2008-09, they had a hype boom when it was announced that a major Liquid Natural Gas (LNG) works was going to be built near Darwin. During that period prices in some cases literally jumped by $50,000 over a single weekend when the existing Territory Government was re-elected on the promise that they would give the LNG plant the full go-ahead if re-elected.
The combination of the ‘normal’ price cycle and the LNG announcement delivered Darwin approximately 20% per annum house price growth for a three-year period. Now that’s a boom by any description!
However, something happened after that. The construction of the LNG plant was delayed by three years. The “Hype Boom” then immediately stopped and the market came to a grinding halt. The lesson to be learned here is that you can make a lot of money from Hype Booms, but beware of what can happen if the ‘hype’ doesn’t come true.
Then there’s what we call a “Real Boom”. A real boom occurs when a rapid increase in population occurs, usually due to a sizable workforce arriving with money in its pocket in an area that has a relatively limited supply of housing. That’s when you get a Real Boom and it is truly amazing to watch. Real Booms have been going on for a long time. Even the Victorian Gold Rush created a real boom in property prices.
A real boom will happen when the major infrastructure project actually begins. Another good example of when this occurs is when the Defence Force moves a large military unit from one place to another.
Winston Churchill once said, “I can predict the future because we have studied the past”.
I hope you are enjoying this?
Watch this space, next I will discuss “What To Buy”!
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