South-west WA loses out in mining boom

The streets of Western Australia are often made to sound like they flow with gold, magnetite, copper, zinc and nickel. But the south-west of the state is looking like the investor’s poor cousin.

Despite being in the throes of the mining boom, the Kalgoorlie/Boulder region of WA has never pulled the double-digit returns of the Pilbara.

New REIWA figures for the March quarter 2011 show the region has a residential yield of 5.5%, which is half that of the Pilbara. Local agents attribute this to the maturity of the market and good planning.

“We have kept up with housing demand for more than 100 years. Karratha and Port Hedland are young and unrealistic. The WA government has even had to step in to help with the Pilbara Cities project,” says Allan Pendal, a partner of Kalgoorlie agent John Matthew & Sons.

Investors hold about 25% of housing stock in Kalgoorlie-Boulder so owner-occupiers drive development. Expansion of the Eastern Goldfields is likely to see some growth.

“While we have no surplus of housing, the yields are kept realistic because we keep up with demand. The rental vacancy is about 1% but the turnover is high at between 2 and 3%,” he says.

Valuer Michael Valetta, director of CBRE Perth, says residential prices throughout the region are very soft and will stay that way for years. He says the mining boom is not always the dominant player.

“In 2009 Ravensthorpe and Hopetoun were hit hard by BHP Billiton’s decision to close the nickel mine. People just didn’t need to live there anymore,” Mr Valetta says.

Canadian resources outfit First Quantum Minerals has now bought the mine, in a move that has already changed the face of the region.

“We have experienced a small revival with the mine reopening,” says local agent Terri Pens of Elders Real Estate Hopetoun.

“While 2009 was a tough year, things are certainly improving. My 150-property rent roll has no vacancies,” Mrs Pens says.

The estate agent expects a housing shortage as Tectonic ramps up its Phillips River project, while Galaxy has opened a lithium mine in Ravensthorpe.

In 2009 Mrs Pens sold 18 houses for BHP for between $375,000 and $395,000. She has just listed a property for resale and expects it to go for $500,000.

But despite this activity, yields remains below 5% for top-of-the-range houses associated with the mines.

In the parallel world of non-mining property, RP Data has the median house price for Ravensthorpe for June 2011 at just $140,000 – down 47.9 per cent on last year – but at least people are returning to the town and the school is full.

Further south, on the southern tip of the state, Albany, with its low rental yield of just a tad over 4%, is not expecting any such benefits should the proposed $1.95 billion Southdown magnetite mine go ahead. Such an operation, which would pump the mineral as slurry 90km from the Wallstead deposit to Albany, will produce about 600 jobs.

“We will employ locally where we can and those that we employ from further afield will be expected to live locally. The numbers will not be huge,” says a Grange spokesperson.

REIWA WA March quarter 2011 residential rental yeilds: houses  

Region / Median / Rent per week / Gross yield

Albany Urban Area $383,360 $300 4.1%

Augusta/Margaret River $437,500 $320 3.8%

Broome Urban Area $607,500 $665 5.7%

Bunbury Urban Area $365,000 $330 4.7%

Busselton $415,000 $310 3.9%

Esperance $350,000 $290 4.3%

Geraldton/Greenough $400,000 $320 4.2%

Kalgoorlie/Boulder $330,000 $350 5.5%

Karratha Urban Area $795,000 $1,600 10.5%

Mandurah/Murray $391,500 $320 4.3%

Northam $287,000 $310 5.6%

Port Hedland Urban Area $751,750 $1,600 11.1%

Source: Landgate/reiwa.com ©