Article supplied by Crawford Realty
Property investors in Pilbara mining towns have been faced with some negative market reports in recent weeks.
SQM Research reported rental vacancies had risen in Hedland and Karratha over the past 12 months, while the Pilbara Development Commission released its latest quarterly housing market update (based on data from REIWA) observing decreases in the average advertised prices for rentals and properties for sale in Hedland, Karratha and Newman.
Ryan Crawford, Director of Crawford Property Group, which focuses on positively geared property investment in Australia’s resources hubs, says market movements such as this are commonplace in the Pilbara’s resources towns and educated investors take advantage of temporary downturns to maximize returns.
“Long term investors in these markets will have experienced several cycles over the years and will know that regular movements and seasonal fluctuations are the nature of these markets. They don’t behave the same as capital cities,” he says.
“Understanding their unique characteristics is the key to maximizing returns and minimizing risk.”
The property markets in Pilbara towns can turn a full cycle in 12 to 18 months and downturns (lasting from three to 12 months) have occurred regularly over the past decade. In contrast, capital cities generally experience a full market cycle every five to eight years.
“During a down cycle, prices and rents in a mining town may roll back 10% to 15% over a six month period providing opportunities for informed investors to take advantage of these short term market changes,” says Mr Crawford.
“Investors can make outstanding capital gains in short periods by purchasing in a slow market and waiting six to 12 months for the upswing - as opposed to waiting for capital growth in the slower capital city cycles.
“Buying against the pack is often the quickest road to wealth creation and well-researched investors are likely purchasing now in preparation for the next market upswing,” he says.
Mr Crawford adds that the Pilbara towns also typically experience two quiet and two busy quarters each year which can be used to investors’ advantage.
“The Christmas period to March produces a larger supply of homes for sale - prices a lower making it an ideal time to buy. The busy period, usually June to October, is generally a result of an increased workforce for new projects awarded in the towns which drives demand for sale and rental stock and creates a sellers’ market.”
The FIFO populations and their average wages in these towns have also never been higher, says Mr Crawford.
“Despite reports of an industry slow down, there is still significant current infrastructure spend, and plenty more in the pipeline. The government is also committed to transforming these towns into cities through a billion dollar civil infrastructure upgrade.
“These towns remain some of the best locations to build property wealth, with the highest yields in the country - our investor clients continue to average 10% to 13% rental yields from their Pilbara investment properties,” he says.
The above information is supplied by Crawford Realty.
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