BlueScope Steel closure will severely hurt Illawarra market: Michael Yardney

Redundancy packages will not rescue the Illawarra property market, according to property analyst Michael Yardney, CEO of Metropole Property Strategists.

The regional area is about to lose its main employer, Bluescope Steel, and about 800 jobs when the Port Kembla factory is closed.

David Laing, Property Council of Australia’s Illawarra chairman, has suggested some employees receiving large redundancy packages may fuel property purchases in the short term, but Yardney disagrees.

“People won’t stay in the region unless there are jobs and a means for them to earn an income,” Yardney tells Property Observer.

Instead he expects a substantial drop in property prices and says it could take up to a decade for the market to recover.

According to Yardney, the only beneficiaries could be the resource-rich regions of WA and North Queensland, where steel workers might look to transfer their skills.

“Having such a large work force disappear from a small demographical area will result in less demand and will also affect already shaky market sentiment –redundancy payments are irrelevant,” Yardney says.

“People won’t buy until they have job security. They will take the opportunity to leave the area.”

Yardney also warns of a flow-on effect to other parts of the local economy, with small businesses such as car dealerships, supermarkets and furniture stores suffering.

Recovering will be dependent on how long it takes for different industries to establish themselves in the area and how councils respond.

“When BHP shut its steel works in the late 1990s it took a long time for Newcastle to recover,” he says.

In the case of Heinz pulling out of Dandenong in July 2000, Yardney says the region was insulated because there were other industries were people could find jobs.

The lesson for investors he says is to only invest in area where there is a wide demographic of people and a wide-spread economy.

MacroPlan Australia senior economist Jason Anderson is forecasting a 20% decline in Illawarra property values while agents in the area are forecasting a surge in vacancies for both commercial and residential properties, the Australian Financial Review reported.