House prices in mining towns are surging again after the end of the boom sparked a huge crash

Andrea Mayes| ABC| 22 August 2019

https://www.abc.net.au/news/2019-08-22/mining-town-house-prices-booming-again-in-wa-queensland/11438774?section=business

Mining town real estate is rebounding, according to new figures which show both house prices and rental yields are rising in resource-rich areas at a faster rate than city housing markets.

Key points:

• House prices in mining regions have fallen up to 80 per cent since the mining boom
• This year, prices have surged as much as 30 per cent in WA and Queensland
• But analysts caution prices are unlikely to reach boom-time peaks again

In Western Australia’s East Pilbara, home to the iron mining towns of Newman and Marble Bar, house prices have risen almost 30 per cent in a year and rental yields sit at a healthy 14 per cent on average.

It is a similar story on the other side of the country, where house prices in Queensland’s Central Highlands region — which encompasses the coal mining towns of the Bowen Basin — have jumped more than 30 per cent in the same period.

The price hikes come off a low base and after years of plummeting prices that followed the end of the mining boom.

In July 2012, the median price of houses in WA’s East Pilbara was $880,000, but by July this year that figure had plummeted to $170,000, a massive 80.5 per cent slump.

House prices in Port Hedland dropped almost 75 per cent in the same period, while the coal mining region of Isaac in Queensland saw housing prices fall 80 per cent, to an average of $124,000.

CoreLogic research analyst Cameron Kusher said the plummeting prices had finally brought renewed interest from investors.

“The price crash was brought on by a number of factors but the major reasons were that the mining boom ended and commodity prices fell, along with the fact that mining investment saw a sharp slowdown as many of the mines shifted from expansionary phase to production phase,” he said.

“The production phase typically requires far fewer workers than the expansion phase, so in this context fly-in fly-out workers certainly did contribute.”

Mr Kusher said mining investment had begun to pick up again, as had commodity prices, in turn contributing to a stronger housing market.

Newman houses in demand as business goes ‘ballistic’

Newman real estate agent Brett Philp has seen first-hand the reversal in real estate fortunes.

The town, about 1,100 kilometres north of Perth, is home to about 7,000 people — many of them employed in the nearby BHP iron ore mines — while a further 4,000 work on a fly-in fly-out basis.

Mr Philp said during the downturn from 2012–2013, the big miners cut back on maintenance of the many company-owned houses in Newman, resulting in them falling into a state of disrepair.

“Now they’re having to spend treble what they saved in maintenance to bring them back up to scratch,” he said.

Mr Philp said the rising iron ore price and ongoing demand from China had led to increased mining activity and a resurgence of business in the town.

“Now there’s no vacancies in the shopping centres and the industrial commercial sector is going ballistic,” Mr Philp said.

He said the situation had changed quickly.

“It’s a very volatile [real estate] market up here — it rises and falls and can do so overnight,” he said.

“But at the moment things are very active, and we are struggling to keep up with rental enquiries.

“I’ve got a four-bedroom, four-bathroom house on the market at the moment for $650 a week, and I’ve got two companies booked in to look at it.

“Anything modern or in a good location is getting lots of interest.”

Analyst doubts prices will return to boom peaks

Mr Kusher said prices were unlikely to return to levels seen in 2012.

“I hesitate to say they never will, but I think it will a long time before prices hit that level again,” he said.

“I am 38 years old and I doubt I will see prices as high again in those locations during my lifetime.

“Some growth is supportable but I think long-term ongoing price rises [are] potentially not.”

Mr Kusher said both investors and lenders were likely to be more cautious after the downturn, and coal mining towns were particularly susceptible in the future.

“Certain mining areas are also linked to commodities that are becoming less in demand, and as the world becomes more environmentally sensitive, demand for thermal coal for example is likely to reduce,” he said.

But in the immediate future, Mr Kusher said mining towns were enticing for investors.

“As interest rates continue to fall, investors will be attracted to higher-yielding investments and the yields on offer in mining towns, from that perspective, are already quite attractive,” he said.