Boom Times in Port Hedland, Western Australia
Port Hedland is booming: but property investors should proceed with caution and here’s why.
Port Hedland had a capital growth rate for the year to Mar 2008 of over 37% according to the latest Residex statistics. The median price for a house in town is now A$770,000 and the average rental yields 2.2%. That average price will get you an average 3 bedroom house on a reasonable sized block, hopefully not too near the port which does run 24/7: Port Hedland is the main port for the Pilbara iron ore mining region of Western Australia. The good news that anything will rent in Port Hedland: in fact arriving in town without a booking, even if you have tent, can be a fraught experience. Everyone needs accommodation Port Hedland and the people who work in Port Hedland do it for one, and one reason: the money. Pay rates are superb for everyone from tradesmen, to cooks, to cleaners. So the rent demand is there, the capital growth has been spectacular: why do I say stay away?
As any property iinvestor knows the main reason that property appreciates in value is scarcity value. If a resource is scare: the price goes up: Manhattan will always be a safe buy for captial gain, its an island in the centre of one of the greatest cities on the planet. Now lets compare Western Australia: the state is basically a 1/3 of the whole of Australia and has a population of 2 million people, 1.5 million of whom live in Perth. Or to put it another way there is a awful lot of empty land in Western Australia. Which brings me back to the point: why is there a shortage of houses in Port Hedland ? Not because of the lack of land really, though to be fair the town is situated on a peninsular with tidal areas surrounding it which are unsuitable for building. 
No the problem is, as is often the case in Western Australia, the planning regulations. There has been no land available for sub-division. Finally however, years into the mining boom the State government has announced not one but three new sub-divisions with the first one to start within months. The short term shortage may improve.
In the end though a property investment in a town such as Port Hedland really isn’t a property investment: its an investment in Australia’s resources boom. Now that’s looking like a pretty good thing at the moment: the only thing stopping Australia shipping more iron ore to China is a lack of port facilities and a worldwide shortage of shipping. There is no shortage of product or of demand. That’s just the iron ore story: Western Australia also produces significant quantities of gold, nickle, coal oh and oil and gas too. Again that investment is probably sound too: but don’t confuse it with a property investment. As much as real estate agents love to talk lifestyle, there is no lifestyle in Port Hedland. Its a working town where people work long shifts by choice. The wind blows the dust from the uncovered ore trains over town and even more from the storage piles at the port. It’s about 700km north and more than 24 hours (non-stop) drive to Perth in the south: Port Hedland is an awful long way from anywhere. Oh and there is the odd cyclone in the wet season. If the mining boom stops you won’t be able to give housing away in Port Hedland, this is very much a one game town. There’s only one game in town and that’s mining. Save your self some aggravation and buy some shares instead!
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Comments on Boom Times in Port Hedland, Western Australia
This person obviously has not done his or her research within the region. The pure concept of Property Investment is to buy in an area which has low vacancy, high yields, good growth rate and of course a sustainable future within the region. PH ticks the box in every area including ROI’s of over 10% in some cases, 0% vacancy, some amazing growth even with a slowing economy, and many years of growth ahead of it. The thurst of Iron Ore from China will not be stopping any time soon so my suggestion is get in quick before the prices get out of reach.
I am very familiar with the WA property market Hayden. The point you miss that the boom in places like Hedland is a 1 horse race :iron ore and China that’s it. Guess what the biggest minerals exploration program is in China? Looking for iron ore in China. There is no slowing growth in WA (thats a eastern Australia problem)- but if a) something happens to China’s economic demand or b) they find alternative, cheaper, sources of iron ore – it will negative growth and high vacancy in Hedland.
The art of property investment – is not to see where the boom has been but to work out where the next boom will be. And I like my property investments in areas which have a broad-based sustainable demand from more than one industry and certainly more than one employer
The problem with Port Hedland is that although ROIs may be 10%, borrowing to finance it is running at 9-10% anyway. Your tenants will be paying your mortgage and not much else. House prices have already skyrocketed; they’re unlikely to rise much more before the additional subdivisions come online.
If you already had property in PH before the boom, you’re in luck. Getting into it now, though… I just can’t see the profit.
Maybe if you could lay hands on a blank patch of land there and arrange for a boatload of portacabins to be delivered in a ‘trailer park’ arrangement, you _might_ be able to make enough in rent to cover the cost of shipping and setup.
But I doubt it.
Steve-o – I agree – to be honest if you want to invest in the WA iron ore boom buy some shares in Fortescue or BHP – they don’t involve incompetent property managers and inconsiderate tenants! Its not like Port Hedland is going to have a second life as a retirement destination anytime soon LOL! There has been some recently publicized land releases in the Port Hedland area but you could buy in outer Perth for the same price LOL ! Thanks for commenting
I am looking into buying a property in Port Hedland to live in and after doing some research I have found the houses are 20-30% overpriced. Even if you take into account the phenomonal growth rates of 30% they are still overpriced. It appears the commision based real estate agents only have dollar signs in their eyes. The 2 bedroom property I am renting at the moment for $750 is going to be put up to $850 a week when I leave. They didn’t do anything for the $750 I was paying!!!
Yes the rents are outrageous – for the record for exactly 1/2 the amount you are paying in Port Hedland- you could rent a furnished 2 bed 500m from the beach in Scarborough, Perth. You touch on another issue too – I wouldn’t like a remote landlord’s chance of finding a competent local property manager: anyone who is competent is probably already being well-paid to work in the mining industry! Good luck with your search and thanks for commenting