70: Commodities Boom - Why Does This Matter To The Property Investor?
05-27-2006
The PropertyInvesting.net Team
There is a huge bank of wealth being created by the boom in commodities - namely, oil, gas, copper, iron, coal, uranium, aluminium etc. PropertyInvesting.net has given previous advice and guidance on the best places to invest to hedge oneself against a commodities boom. This boom shows no sign of ending because of the huge projected demand from China, India, Brazil and USA. Countries that are rich in natural resources will tend to outperform those without natural resources. The cities in such countries will have a flood of capital passing into them in view of the jobs, profits and business expansion related to their feverish investment to maximise value and sell commodities globally - these commodities prices are 
being supported by high manufacturing / growth in China (10% per annum GDP) and India (8%). Because manufacturing costs are so low in China and India, this will likely keep inflation low despite booming commodities prices. If interest rates thence stay low and global GDP growth is high, this would lead to strong capital value increases in many global property values - with the commodities rich countries outperforming those with no commodities. The possible exceptions are the extremely low cost manufacturing centres such as India and China - because of their cost efficiency, they will be able to afford higher commodities prices. Profits generated will be borrowed to developed countries such as the USA, as their deficit expands. So, as long as the commodities boom does not end (or crash), then the following countries and cities are worth considering (both residential and commercial investment):
- Canada - rich in oil shale, gas, and metals: Calgary
- Norway - oil/gas: Stavanger, Bergen
- USA - coal: Wyoming Oil/Gas: Houston, Dallas, Bakersfield, Baton Rouge (spill over from New Orleans)
- UAE: oil/gas - Dubai, Abu Dhabi
- Saudi Arabia: oil/gas - all cities*
- Oman: oil/gas - Muscat
- Qatar: LNG/gas - Doha
- Kuwait : oil
- Singapore: oil refining
- Malaysia: oil/gas - Kuala Lumpa, Sabah
- Australia: Gas/LNG, iron ore, coal, metals - Perth, Melbourne, Sydney NW Shelf towns
- Scotland - Oil/Gas : Aberdeen
- Netherlands - Gas : Assen, Groningen, The Hague
- Russia - Oil/Gas : Moscow
- South Africa - metals, coal, minerals - Cape Town, J'burg
- Bolivia - gas*
- Venezuela - oil/gas : Caracas*
- Brunei - oil/gas/LNG : Darasalam
- Angola - oil/gas*
- Kazakhstan - oil/gas: Almaty
- Libya - oil: Tripoli
- Algeria - oil/gas
- Nigeria - oil/gas - Lagos, Warri, Port Harcourt*
* High political/country investment risk
In addition, cities that heavily trade in oil, gas, metals and where companies have their HQs will also benefit:
- UK: London, Aberdeen
- USA: New York, Houston
- Far East: Singapore, Shanghai, Perth
- Europe: Rotterdam, The Hague
- Russia: Moscow
So, if you want to lower your property investment risk with regard to high commodities prices - invest in the areas where most of the raw material comes from (e.g. Calgary, Aberdeen, Brunei), or wealth generated from these commodities ends up in (e.g. London). If you want to lower risk further, then best choose a country with low political risk and/or risk of the energy business being (further) nationalised.