Mining resurgence driving return to boom time
While property markets in capital cities endure a period of tumult, COVID-19 has failed to undermine values in mining towns around Australia.
Swelling populations, baby booms and surging rent prices are the gold lining for the towns and regions reliant on mineral exports.
From the coal mines of Mackay on the central Queensland coast to the iron ore and natural gas hub of Karratha, 4,411 kms away in Western Australia’s Pilbara region, resources-based property markets are not so much tolerating as benefiting from the pandemic that has led to more work-from-home and less travel.
Fly-in fly-out (FIFO) workers are now basing themselves in the towns in which they work, and school numbers are swelling as families make long term investments in the townships.
The last census showed regional Australia attracted 65,000 more new residents than the capital cities, as 1.2 million people moved to the regions between 2011 and 2016. The Regional Australia Institute believes coronavirus is helping the trend continue.
“Over the last few months, we've all had to change how we work and this has allowed staff and employers to see that location is no longer a barrier for where we choose to work,” the think tank's chief executive Liz Ritchie said.
Property listings portal Domain reported in June that regional NSW suburbs posted a surge in property searches of up to 117 per cent as people’s lifestyle priorities have undergone a rethink in response to such turbulent times.
The average price of a house in regional NSW is $480,437, a monthly rise of +0.3%, while units were unchanged at 408,115.
Totally digging it
The best national performer for annual median house price growth for a second consecutive quarter was Mackay, with a rise of 6.2 per cent to $360,000. The small city is the gateway to the enormous Bowen Basin coal mining reserves.
Mackay’s housing market has been in recovery for more than five years, with its median house price recuperating from significant falls. However, it continues to inch closer to its top median price of $390,000, recorded in December 2014 (-7.7 per cent).
A dynamic resources sector, coupled with large infrastructure projects, saw a boost in employment opportunities and population growth throughout the year. That momentum gained over the last year or two has continued into the first three months of 2020.
More than 1,200 kms inland, Mount Isa was experiencing a similar upturn in its fortunes, with expanding copper, lead, zinc and silver operations providing positivity for its property sector.
John Tully, Principal of City and Country Realty, told Australian Property Investor Magazine that median property prices had soared from $200,000 to $300,000 over the past 18 months.
“There’s been a massive influx of people moving here since the COVID crisis started, and people are now staying rather than working FIFO,” Mr Tully said.
“The rental vacancy rate is said to be two per cent but there’s been no new building for about nine years and we’re out of rentals.
“There’s a lot of government agencies, teachers, nurses and more kids here now than in a long time – it’s all part of a transition based on longer term investment and diversification that has taken out the boom and bust extremes we’ve had in the past,” he said.
It’s the same story in the port town of Gladstone north of Brisbane, also reliant on mining to generate its local industries, with vacancies down and rents rising. Property prices are also rising, albeit from a low base. West Gladstone is up 16 per cent and Glen Eden 23 per cent in annual terms, while Calliope, New Auckland and Tannum Sands have all risen around 8.5 per cent in the past year.
Iron ore operations centre Karratha recorded some of the biggest national increases in rent prices, with suburbs Millars Well, Pegs Creek and Nickol up 37.5 per cent, 35 per cent and 27.5 per cent respectively over the year to June, according to the latest Domain Rent Report.
Just over 200kms away, Port Hedland, the highest tonnage port in Australia, has also turned a corner after suffering a mighty crash that left many property owners’ lives in financial tatters.
In July 2012, the median price of houses in WA's East Pilbara was $880,000, but by July last year that figure had plummeted to $170,000, a massive 80.5 per cent slump. House prices in Port Hedland dropped almost 75 per cent in the same period.
As the resource sector revives, property prices have arrested their slide with 0.9 per cent year-on-year rise.
Speaking to Australian Property Investor Magazine, Pilbara Real Estate director Rob Sleator said the residential property market has been improving for three years in terms of sales and leasing. In Karratha, average rent among their 512 managed properties was $621 per week. The national median is $436.
“Unemployment is low and the demographics are changing,” Mr Sleator said.
“Karratha is experiencing a baby boom time with more than 500 births per year, which is high on a per capita basis, and those people want their own homes and are buying rather than rent.
Rents are rising fast, most leases have a rent increase of 5 to 10 per cent every six months, plus building costs are high, land prices high.
The replacement cost of the top-end home now is $200k above that of an eight-year established same build home.”
COVID-19 and tropical cyclones have all taken their toll but failed to dampen the Pilbara’s prospects.
“I suggest we will see lots more land selling and people start to build,” Mr Sleator said.
“Prices for sales and rents will continue upwards, and there are a few massive projects in the pipeline waiting on a final investment decision, so if they go ahead it will put more pressure on rents and sale prices.”
In South Australia, iron ore port and steel producer Whyalla has also started mounting a strong comeback from the previous downturn, with median property prices up 7.4 per cent in the past year.