South Hedland heads the regional Western Australian localities cheaper to buy than rent: RP Data
The mining town of South Hedland is the leading town in WA where it’s cheaper to buy that rent, according to RP Data.
The data company's figures show that it can be $3,184 a month cheaper to buy a property with a principal and interest loan that it is to rent.
Agent Ryan Crawford from Crawford Realty says it’s been the case for a long time but rents have jumped noticeably in the last three months.
“There was a substantial jump in people coming to town at that time, and that flowed through into the rental market,” Crawford says.
He says the projects have been going on for a long time and are projected to last for some time into the future.
“They’re all long-term projects. There’s some interesting things happening with prices and China. Whilst that is a short-term thing that will fluctuate with global sector changes, the major effects are based on pricing. The commitments that mining companies like BHP and FMG have made will span 10 years plus.”
“Some have been put on hold. They’re just that – on hold."
Crawford says even though some projects have been put on hold the decisions haven’t had a large influence on the housing market.
“While people might see the postponements at taking large chunks out of the market, it’s not the case because the majority of work forces haven’t been bought on yet.”
Crawford is currently marketing 18 Lovell Place (architect's impression below), a block of eight units due to be finished next year.
Two of the units, priced at $599,000, have already sold.
The units are expected to rent at more than $1,300 a week, providing yields of 11.3%.
“The site is a fantastic option to get a low price unit in the market,” Crawford says.
Crawford says almost all interest in South Hedland comes from investors.
“It’s heavily investor based. Through our market it’s 90% investors. They come from the West Australian market, and there’s a lot of interest from the east coast and overseas.”
A recent Westpac report found Port Hedland, the associated mining town is a “single-industry” and possibly risky town, making it harder for investors to secure loans in the area.
The Real Estate Institute of Western Australia's David Airey says the changes probably reflect a view from within the bank that “housing prices and rental returns in particular, in places like Karratha, Port Hedland, South Hedland and Newman are unsustainable”.
“The state government is anxious to address affordability in the Pilbara, and while this won’t happen overnight it’s clear that housing demands will be better met over the next few years.”
Crawford says there are big market differences between South Hedland and Port Hedland.
“The demographics really vary between Port Hedland and South Hedland and one differences is price point. Port Hedland is on the ocean while South Hedland is inland,” Crawford says.
“The price difference for a similar home is now $500,000 to $600,000 just from inland to coastal.
“Port Hedland is priced fairly high and is relatively unaffordable, but in South Hedland while there are increases it is still affordable.”
One of the main developments coming in to South Hedland is a 500-plus dwellings project exclusively for BHP staff.
Crawford says the project is at least two years from completion.
RP Data compared the cost of a mortgage vs the cost of renting in four different ways: 1, Principal and interest loan on a variable mortgage rate; 2. Interest-only loan on a variable mortgage rate; 3. Principal and interest loan on a three-year fixed mortgage rate; and 4. Interest-only loan on a three year fixed mortgage rate.
The comparison does not take into consideration stamp duty, associated buying costs and strata fees, where applicable.
The data contains both units and houses, but in most suburbs on the list it is cheaper to buy a unit than buy one.
The median house asking rent in South Hedland is $1,775 a week, according to RP Data, which estimates it is $3,184 cheaper per month to buy a house with a principal and interest variable mortgage than rent one.
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