After ‘normalising’ over the past 18 months due to softening mining investment, the property markets of many of Australia’s mining areas could be due a comeback, according to Ryan Crawford, group director of Crawford Property Group.
Crawford says that renewed investor, mining and infrastructure confidence is returning to certain regions and is likely to result in new investment opportunities over 2014.
“Many towns hit by the resource slow-down that was 2013 are now offering astute investors the opportunity to benefit from growth as they spring back into action in the New Year,” Crawford says.
He lists three WA locations worth keeping an eye on:
Karratha recently made headlines for experiencing a 30% reduction in median price from its peak in 2011. However the town’s house price correction is providing investors an opportunity to access the market at its plateau ahead of expected upward trending in 2014, according to Crawford.
“For long term investors, a stable Karratha market with a more sustainable level of growth ahead of it is good news. Yields remain exceptional at 9 -10%,” Crawford says.
Part of the WA government’s ‘Pilbara Cities’ initiative, Karratha’s population is expected to increase from its current 18,000 to 50,000 by 2035. To support this increase, major investment into civil infrastructure is underway to redevelop and revitalise the town. A $65m ‘phase 1’ city centre upgrade is now almost complete with $110m in works for ‘phase 2’ to start next year.
Karratha also remains the service centre for Chevron’s $50bn Gorgon LNG project – currently 75% complete.
With the lifespan of Karratha’s other LNG project, Woodside’s Pluto (completed in 2012) estimated to be 40 years and Gorgon at least 40 years, these two projects alone will contribute to a constant demand for housing.
South Hedland, WA
“For investors, [South Hedland] now presents an excellent opportunity to secure quality new stock at low prices,” says Crawford, indicating that the area has undergone a price correction after a period of unsustainable growth.
He says the town’s new mega project – port and rail infrastructure for the $10bn Roy Hill iron ore mine – is expected to employ 3,600 people at the peak of construction and 2,000 while it is operational.
BHP Billiton and FMG, the town’s two other major players, have also indicated that further port expansion works will be required as iron ore exports continue to rise.
“South Hedland is the main residential area and has been undergoing a major transformation in recent years as, like Karratha, the government strives to transform the town into a ‘City of the North’,” says Crawford.
The town is forecast to support a population of 50,000 by 2035 – up from around 20,000 today.
The town is delivering investors yields well above average at 10% to 11%.
Tom Price, WA
This Pilbara iron ore town hasn't garnered the same attention as the other towns in the region due to its inaccessibility for investors - until recently, there had been no land releases for 40 years. Following recent releases and new development, investors now have an opportunity to access this tightly held market, Crawford says.
“Tom Price is integral to Rio Tinto’s Pilbara iron ore operations, providing infrastructure and services to the company and its residentially based workforce,” he says.
The company’s newest mine, Hope Downs 4, has now become fully operational with the permanent workforce totalling 600, increasing pressure on the town’s role as Rio’s service centre.
Like all miners, Rio is in cost efficiency mode but is still pushing ahead with expansion plans to lift production to 360 million tonnes a year – an increase of more than 50% of its existing capacity. Currently, around $2bn could be invested over five years, cementing demand for worker housing in Tom Price.
Despite the recent land release, housing supply remains very limited. According to a report by Regional Development Australia, Tom Price had a dwelling shortfall of 259 homes in 2012 and will require between 270 and 470 new homes by 2015 – well below current supply. The town has historically low vacancy rates and high percentage of renters - 86% of Tom Price residents rent their home, with a majority of those leased by mining companies providing housing for their staff.