Terry Ryder's dirty dozen - from Perth to Mount Isa the 12 localities to avoid

Terry Ryder's dirty dozen - from Perth to Mount Isa the 12 localities to avoid
Terry Ryder's dirty dozen - from Perth to Mount Isa the 12 localities to avoid

The suburb of Perth is only a tiny part of the vast metropolitan area known as Perth, but its property market is a microcosm for what’s happening more broadly across the WA capital. 

The suburb of Perth, partly CBD and partly residential area, is a sea of negative numbers. Indeed, the numbers are so bad it’s made our Bottom 12 list in The Price Predictor Index – the 12 worst places to buy right now, otherwise known as The Dirty Dozen.

It came to our attention primarily because of the pattern in sales volumes, with quarterly sales of dwellings totalling 149, 136, 127, 93, 99, 86, 84 and 70 in the past eight consecutive quarters, which means sales activity has halved in two years. 

But there are various other negative indicators. Vacancies are high at 6.4%, according to SQM Research. Median prices have fallen 7% in the past 12 months, both for houses and for units, according to Domain. 

The median house price today, $525,000, is at the same level as five years ago. 

Its market situation provides a snapshot of the general trend in the broader city region of the same name. Perth, the metropolitan area, displays many similar qualities: sales activity falling, prices and rents following, vacancies in many areas way too high, especially in the inner-city apartment suburbs. 

Four other WA locations make The Dirty Dozen, all of them resources-impacted centre. All four – Port Hedland, Karratha, Newman and Kambalda – have been bad news for 2-3 years now. The point is that, contrary to the best propaganda efforts of marketers, the worst is not yet over. 

And, if you can believe BIS Shrapnel’s recent assessment of the resources sector and mining towns, it’ll get worse before it gets better. 

Let’s use Port Hedland as a case study. This market, comprising Port Hedland and neighbouring South Hedland, has been in steep decline for the past three years.

Sales rates have declined from peak levels – quarterly sales have dropped from 70-80 per quarter three years ago to around 20-30 per quarter in 2015 - but the greatest measure of the deterioration of this market is in the price and rental data.

Three years ago, Port Hedland had a median house price of $1.3 million; today it is $880,000, lower than five years ago, but still too high to provide value for money. In South Hedland the median price is down to $680,000. 

The median weekly rent has dropped from $2,500 to $900 in Port Hedland and to $650 in South Hedland – and typical yields are now 5.5%, compared to 10-11% when the resources boom was at its peak. No sensible investor would buy at yields so low in a location where the risks are so high.

The decline in rents has followed a significant rise in vacancy rates, with Port Hedland currently 6.5% and South Hedland 7%. 

This market will no doubt recover when commodity prices do, but it's difficult to imagine the median house price reaching $1.3 million again any time soon.

Six of The Dirty Dozen are in Queensland and all are resources-related centres. They include the usual suspects, such as Gladstone, Emerald, Moranbah and the towns of the Surat Basin.

Less often written about is Mount Isa. This is one of Australia’s largest mining towns and a significant regional centre in far western Queensland.

But its property market has dropped alarmingly since early in 2013. In consecutive quarters, the number of dwelling sales has dropped from 189-158-78-63-61-46-41-50-49-42-25.

The suburb of Sunset is typical – sales numbers in consecutive quarters have been 30-23-8-10-12-12-7-6-8-8-8-6. In Pioneer, quarterly sales have been 20-16-12-7-3-8-4-1-2-4-7-1-2. Menzies has recorded just four sales in the past 18 months. 

This remarkable decline coincided with the merger between Glencore and Mount Isa’s biggest employer, Xstrata – followed by downsizing. Vacancies have been rising since early 2013, reaching 6.5%, and have now moderated a little to 4.5%.

Prices have dropped markedly, with median prices down sharply in Mornington (23%) and Townview (18%) in the past 12 months. 

The locations that make up The Dirty Dozen demonstrate the remarkable diversity of situations in property markets across Australia. 

Two capital cities have had strong markets, two have been in serious decline and the other four have shown varying degrees of stagnation or moderate growth. Regional Australia has similar patterns, ranging from boom centres through dormant markets to absolute basket cases.

 

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter. 

 

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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Residential Listings

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