Information supplied by Pindan
Western Australia’s Pilbara region has been known as a hot spot for property investment for years now. Fueled by Western Australia’s mining boom, properties in areas such as South Hedland, Port Hedland and Karratha have traditionally been snapped up.
However, the claim, that “the mining boom is over” has been much touted in recent months, and perhaps none more so than during the recent Federal Election cycle. So people have started to view WA’s property market in the North-West a little differently in recent months. But, are investors missing out on what is still a huge opportunity?
Is the mining boom really over?
Blanket claims that “the boom” peaked in 2012 and flat lined ever since (with Western Australia the epicentre of the fall) have been overstated and belie a gross over-simplification of the state of the resources sector.
Key players in WA remain optimistic, buoyed by the state’s iron ore production exceeding expectations and China’s demand for steel looking to remain high.
The statistics, expert analysis and government forecasts demonstrate the mining boom has “not stopped”, but rather transitioned from a capital investment phase to a production phase.
What is happening in the mining industry in Western Australia?
Activity in WA’s north is far from winding down and in fact signs show it is quite the opposite with activity ramping up, including Gina Reinhart’s $9.8bn Roy Hill iron ore project; Altas Iron, BC Iron and Decmil Group’s increased iron ore production; and the $800m investment in a new explosives plant at Yara Pilbara’s Burrup industrial estate.
Also, whatever your politics, the nation’s change in government is destined to be beneficial for the mining industry. The Liberal government is set to ‘reboot’ the industry by scrapping the mining tax and reviving an appetite for investment. The Liberals have also committed to a three-year trial of an Exploration Development Incentive (EDI) to encourage mineral exploration; ensuring new mining projects are found and developed in Western Australia, creating thousands of jobs.
What does this mean for the property industry in WA?
Effectively there is a great deal going on in WA and the property industry is still set to benefit. The fundamentals outlined above demonstrate that continued growth is likely to continue in the short to medium term.
In addition to this, mining activity in WA’s north and the associated population pressures will continue to drive demand for property. Housing markets in the Perth metropolitan region and north-west are still undersupplied and smart buyers are not ignoring the signs of steady property growth.
What to look for in an investment that could benefit from the mining industry in WA
Look for a property that will appeal to the mining workforce. Demand for good quality houses in areas such as Port Hedland and South Hedland are in strong demand - with properties averaging 30% returns per annum when taking into account capital growth and rental yields.
Tenants and companies looking to house their workforce are looking for comfortable housing that is well built, has quality fittings and is within easy reach of key amenities.
What areas are good investment opportunities?
South Hedland is still very much a bullet-proof place to buy property. The population growth of South Hedland has surged from 13,000 in 2006 to 19,500 last year and is set to rise further with many projects moving to production phase and requiring a long-term workforce. The Pilbara Industry Community Council predicts that the population of South Hedland will grow to 21,000 by 2015, whilst the Port Hedland Council has a vision for 40,000 by 2025.
The huge rate of population growth creates a massive demand for homes that’s seen median house prices in South Hedland soar to $866,000, up from $260,000 just seven years ago. Rental returns are reflecting that demand with the median South Hedland housing rental now $1,700 per week, with the median rent for units at $1400 per week (REIWA January-March quarter 2013). Investors in South Hedland have consistently enjoyed rental returns of 10-13% in the last decade compared to the Perth average of 4.3%.
For more information about investing in South Hedland, visit http://www.barrowsouth.com.au/Investment.aspx
Disclaimer: while due care is taken, the viewpoints expressed by sponsors do not necessarily reflect the opinions of Your Investment Property.
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