A silver lining is emerging with regards to the fall in property prices in the state’s north-west, particularly in the resources hub of Karratha.
A silver lining is emerging with regards to the fall in property prices in the state’s north-west, particularly in the resources hub of Karratha.
Falling rents and declining median house prices are creating new opportunities for business in Karratha, providing a boost of amenity in a town reeling from a near-half decade of overheated property values.
Since the peak of the market in 2010, the only stories emerging from the Pilbara have been ones of heartbreak, with median prices in the most affected market of Karratha plunging by 59 per cent since iron ore prices began their decline in 2012.
However, a fresh report into Pilbara property by valuation agency Herron Todd White shows life is returning to the market, with a significant recent uptick in purchasing activity driven not only by local owner-occupiers, but also investors.
HTW Perth managing director Brendon Ptolomey said sales rates had doubled year on year, with buyers seeing opportunity in a market where prices had retreated to levels last experienced a decade ago.
“The stories we keep hearing are people coming out of rentals and buying,” Mr Ptolomey told Business News.
“They might have been in a share house, or they might have been paying over the market odds on a lease term that was still running out from previous market conditions.
“Essentially they are turning around and saying ‘for similar amounts of money I can go down the road and buy a house’.
“That’s where some of that demand has been driven from.”
Mr Ptolomey said while some people might be surprised that demand existed in Karratha, he acknowledged the town still had some way to go before it could be considered to have a ‘normal’ property market.
Nevertheless, Mr Ptolomey said it was vital for the amenity of the town that people could purchase property – something that was absent in recent years.
“This is the long-term goal of the government’s strategy there, and it’s really commendable that someone has had the vision to make sure that they supply housing into the area,” he said.
“It is extremely important that the town gets to act like a normal regional town, supporting one of Australia’s most important industries.
“You can’t underestimate how important that process has been, and unfortunately there are winners and losers.”
Among the winners, other than those looking for a more affordable home, have been small businesses previously constrained by high rents and a limited availability of commercial premises.
Recent developments in Karratha, spearheaded by the LandCorp-led The Quarter, have provided an opportunity for hospitality, retail and professional services businesses to establish themselves and attract workers.
The state government also recently announced it would provide $2 million in Royalties for Regions funds for the development of the Karratha Enterprise Hub, the region’s first co-working hub, with the capacity to provide space for up to 25 new businesses.
Insurance broking firm EBM said increasing demand for its services, which it considers to be a grassroots barometer of local economies, was evidence of rising investment confidence in the Pilbara.
EBM WA managing director Ward Dedman said there had been noticeable growth in demand from small and medium-sized enterprises, not only in Karratha but also in other Pilbara towns.
“We believe the essence of that is around the reduced cost of establishment,” he said.
“Clearly the costs were a real barrier to entry; we went up there around five years ago and we were paying $2,500 per week for a house for our regional manager; that’s back to $600 per week now, which is still high, but its far better than it previously was.
“We haven’t yet had the benefits of a revised rent for the office but we are a few months away from a rent renewal and it will certainly be half what we’ve paid over the five years.”
Mr Dedman said another driver of demand was the enhanced liveability of Karratha, with state government-funded community facilities providing the impetus for people to move north permanently.
“It’s a much better community these days, the infrastructure is built, the gymnasium and the rec centres, schools, hospitals, they are really well catered for on that front,” he said.
“Certainly the people who work for us enjoy living there and enjoy having those options in the social environment, training and education, especially for their kids.”
Membership at the Karratha District Chamber of Commerce has also risen, to more than 450, nearly back to peak construction boom numbers, with more than 400 new Australian Business Numbers issued in Karratha this year.
Commercial rents, which had spiked to more than $700 per square metre, were now back to between $200 to $300/sqm, enabling small businesses to commit to leases.
One of Karratha’s more successful small business owners in recent years is Bart Parsons, who operates three hospitality venues in the centre of the Pilbara town.
Mr Parsons, whose first venue, Blanche Bar, was Karratha’s first small bar, said the moderation of Karratha’s property market had provided a significant boost to his businesses.
“Things like housing and costs of doing business have definitely come down,” he said.
“One of the houses we were paying for was $1,500/week, now it’s $300/week.
“When you factor in those sorts of things, and add the fact that it’s easier to get staff at the moment, it really makes things pretty viable.
“While things are cheap to do, especially building costs and finding people to do things, it’s a pretty good climate to put a bit of investment in.
“I’m pretty confident about the place. I can definitely see a bit of a light at the end of the tunnel.”
Notwithstanding the small business boost, the Pilbara price plunge hasn’t been kind to everyone.
HTW’s report showed some property owners had been severely burned by the changing conditions, with the most severe correction being for a property in Millars Well, Karratha, which sold for $920,000 less than its previous purchase price.
Other significant losses included a $775,000 hit in Baynton, a $665,000 hit in Bulgarra, and a $675,000 reduction in value in Nickol.
Mr Ptolomey said those losses had resulted in banks and other lending institutions being more restrictive in the Pilbara, at a time he believed they should be lending.
“The guys on the east coast, and we all talk to them pretty regularly, they are all sitting there thinking that Perth is a basket case and the Pilbara is even worse,” Mr Ptolomey told Business News.
“Our main message to those guys is to have a look at their lending policies in the region because it’s much less risky to lend money up there now than it was in the boom, which is what they did.
“It’s all very ironic from our point of view; we look at risk, and in terms of assisting the normalisation of the town, the banks and the lenders need to come to the party in terms of lending money to the borrowers that want to purchase those properties.”
