WA's mining sector statistics breaks records, but property markets tell a different story
The mineral and petroleum sector in Western Australia reached a new record value of $113.8 billion during 2013, surpassing the $108 billion record 2011 number.
This is a 15% increase on 2012, according to Mines and Petroleum Minister Bill Marmion.
With iron ore continuing to be the most valuable export, with sales placed at $68 billion, the second most valuable commodity is currently gold. Demand from China is said to be behind a significant amount of the strength of iron ore.
“Together, iron ore and gold accounted for more than $76 billion [86%] of all mineral sales in 2013,” said Marmion.
“Strong demand from China, meant the iron ore sector achieved a record 556 million tonnes in exports, an increase of 16% over the previous calendar year," he said.
He did, however, point to the average gold price being down 16%, contributing to a decrease of 7% in the sales value on 2012.
The depreciation of the Australia dollar has helped boost the value of the exports as it countered the fall in commodity prices during the year.
“The value of sales was also assisted by increases in some of the volumes of commodities sold," he said.
He said that petroleum, including crude oil, condensate, LNG, natural gas and LPG (butane and propane) represented only a slight increase of 1% on the previous year. He noted that this was due to Pluto LNG coming onboard, countering falls in the sales volume and total value of crude oil and LPG.
Despite the resources sector being called the "backbone" of the West Australian economy, observer Terry Ryder recently pointed to signs of a struggle in some of the property industries in mining towns.
"One I received this week was touting two-bedroom units in Port Hedland for $715,000, claiming they would rent for $1,400 per week, provide a 10.2% return and earn up to $22,000 per year in profit - thereby providing the “perfect investment opportunity” for first-time investors," he wrote at the end of January 2014.
"The promo failed to mention that Port Hedland’s vacancy rate is now above 6%, that prices have dropped by up to 10% in the past 12 months and typical yields are now around 7% (and falling)."
This was an area that had been lauded as a 'hotspot' in 2012, including by Ryder, and certainly saw some significant growth before the current warning signs.
Karratha's story has been similarly unpleasant for those that purchased late - dropping from $850,000 to $450,000 in the space of around six months, Ryder explained. With rising vacancy rates, it's prudent for investors to wait and see on a number of these towns.
If you're considering purchasing into a mining town, read these five tips from Simon Pressley to see you make the best decision possible.