Mining town prices booming but vulnerable
Housing markets in mining towns are outperforming some of the most prestigious suburbs in capital cities, but investors should be cautious due to their dependence on the resources boom, according to RP Data’s Tim Lawless.
The boom is being driven by high levels of demand coupled with a scarcity of quality housing.
"With the non-rural commodities sector gathering pace, resource-driven regions should continue to prosper,” Lawless says.
But he warns prospective investors and home owners in these locations that economies with a singular dependency on one given commodity can be risky. “Any weakness in the resources sector is likely to be reflected within the housing market,” he says.
Western Australia’s Roebourne, Port Hedland (pictured) and Broome council areas have recorded the highest median house prices outside of a capital city at $950,000, $775,000 and $660,000 respectively over the year to June 2011.
In comparison, the median house price in Perth stands at $470,000 and has depreciated by 6% over the last 12 months according to the June Quarter Market Facts report carried by the REIA.
In Queensland the resource-intensive regions of Isaac ($445,000) and Gladstone ($415,000) are showing the highest median house prices of any council region in the state outside of South East Queensland and are on an equal footing with Brisbane, where the median price currently stands at $435,000 (a drop of 5.4% for the year) according to the REIA.
Besides strong price appreciation, rental yields in most mining towns are well in excess of the capital city averages.
The highest indicative gross rental yields of any council region around Australia are found in Port Hedland at 12.7%. Queensland’s Cloncurry and Isaac are a close second and third, returning an average gross yield of 11.4% and 11.1% respectively.
Rental yields in capital cities are half or less than half of mining town returns with RP Data calculating the yield on Sydney houses for July at 4.4% for houses and 5.2% for units.
The highest capital city rental yields are currently being achieved in Darwin, at 5.2% for houses and 5.8% for units.