The Pilbara’s property market descent

The Pilbara’s property market descent

Jessie RichardsonDecember 7, 2020

The property woes of the Pilbara region in the wake of a moving mining economy are well known.

As the iron ore industry moves from the construction phase to the operations phase and commodity prices drop, so too have rents and home prices.

The Pilbara's property boom, a few years ago, saw investors chase after the stream of fly-in, fly-out workers that flooded its major mining towns. The promise of a population spike and an undersupply of properties lured in investors after sky-high rental yields.

There's no doubt that there was once money to be made by investors who purchased in the Pilbara's mining towns, but those who bought in at the height of the boom have lost, and lost big.

According to the Western Australian government's latest Pilbara Residential Housing & Land Snapshot, all three major towns – Port and South Hedland, Karratha and Newman – have recorded rental declines in the December quarter of 2014, for the fifth consecutive quarter in a row.

Click charts to open in a new window:

Home prices aren't faring much better, for those who are hoping to sell and recover some of the declining rental income with capital growth:

In Port Hedland, rental prices have been declining for even longer – the last three months of 2014 marked the ninth consecutive quarter of declines. The average advertised rental price peaked in the September quarter of 2014 at $2,544 per week. In the latest quarter, the average was less than half that: $1,153 per week, a seven year-low.

The graph below shows just how volatile rents have been in Port Hedland, compared with the low steady growth of rents in Perth.

Last week, Port and South Hedland real estate agent Barry Walsh of Jan Ford Real Estate told Property Observer the mining boom peak prices were unsustainable.

"It was totally unsustainable where it was, and now that it's stabilising, it will bottom out, and is in the throes of doing that," said Walsh.

"It was unfortunate that the market went where it did, to unsustainable and disproportionate price levels."

When workers began to exit the region in mid-2012, leaving a surplus of rental properties and driving down rents, investors followed.

The graph below shows the spike in homes on the market, beginning in the first quarter of 2013.

One of the characteristic features of a single-industry town, particularly ones with a large proportion of investor properties in the market and transient workforces, is volatility. Karratha displays a similar pattern to that seen in Port Hedland, with the number of rental properties advertised rising dramatically in mid-2011, mirrored by a steep decline in advertised rents.

That volatility is largely due to the region's transient workforce, which made up a large segment of Karratha's population and housing demand. According to the Australian Bureau of Statistics, Karratha's census night population (the people staying in Karratha on census night) increased from 13,257 in August 2006 to 20,061 in 2011. The "usual residence population", however, was only 16,475 in 2011, up from 11,727 in 2006.

Back-of-the-envelope calculations imply that in 2011, around 18% of the people in Karratha were not usual residents – presumably, many of them were fly-in, fly-out workers.

Karratha's home prices show the same pattern as that seen in Port Hedland, implying a stream of exiting investors – around six months after rents started declining, in early 2011, the number of homes on the market began to climb:

Further inland is Newman, where the amount of rental stock advertised began to increase in late 2012 (see graph below).

The four bedroom Newman home in a planned estate pictured below is currently available to rent. Its asking rent has more than halved in the past year: In March 2014, it was advertised at $2,000 per week. That number gradually eroded over the months, and landlords are now asking for $900 per week.