Rents in decline in popular mining region

By Steven Cross

A recent report suggests the ‘property bubble’ in WA’s Pilbara region has burst, after a wave of properties have flooded the market with stock, driving rents down.

The Pilbara Residential Housing and Land Snapshot for the June 2013 “makes grim reading for local property investors”, according to Garth Davis, branch manager of The Property Club.

“This latest Pilbara property report shows that in Port Hedland and South Hedland the combined number of properties listed for rent jumped by 37 per cent during the June quarter to an all-time high of 401,” he said.

“Rents continued to fall, with the average rent in Port Hedland now at its lowest level since the September 2011 quarter.”

However, the figures are just short-term fluctuations in a volatile market, according to Ryan Crawford, CEO of Crawford Property Group, located in the Pilbara region.

“Rents are down across the three towns due to a period of relative inactivity from industry, following the completion of some major projects,” said Mr Crawford.

“This, in addition to an influx of new residential development, has eased demand for rentals.”

However, Mr Crawford insists there hasn’t been a ‘collapse’ or any bubbles being burst and that investors need only look through the area’s history to see it.

“What we’re seeing at the moment is not much different to what we’ve seen happen in these markets over the past five years. Pilbara markets have always been sensitive and subject to project announcements, workforce fluctuations and new residential development,” he said. 

“They will experience sharp rises in one or two quarters, followed by one or two quarters where rents and values drop back.”

But Mr Davis is not convinced, claiming some areas in the Pilbara are now deep in recession.

“Property prices are falling due to a significant jump in the number of properties listed for sale. In South Hedland the number of properties listed for sale surged during the June quarter from 140 to 225,” he said.

“The property market in Karratha is also in recession, with the report showing that over the past two years average weekly rents have fallen by nearly $500 to $1,285.”

However, Mr Crawford believes investors looking for cash flow are still grinning.

“Cash flow investors are still getting above average yields of between 9 and 15 per cent throughout the region,” he explained.

“However, when it comes to capital growth, investors should consider the Pilbara with a long-term view and not be too concerned by short-term fluctuations.”

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