This article is from the Australian Property Journal archive
DESPITE the potentially high returns on offer throughout regional Western Australia, its property investment market still carries risks and remains better suited to experienced investors.
Momentum Wealth’s latest Residential Regional Property Report: Western Australia shows sales throughout the Pilbara region’s towns of Port Hedland, Karratha and Newman skyrocketed over the year to June as it recovered from the mining boom downturn.
Port Hedland saw 232 transactions over the 12-month period, up from 103 the previous year. Karratha jumped from 171 sales to 270, and Newman from nine to 66.
Managing director of Momentum Wealth, Damian Collins, said the main benefit of the Pilbara is the high rental returns on offer, with rental yields rising back up to between 7-9% in some towns, similar levels seen during the resources construction boom.
Average house prices in Port Hedland dropped from more than $1.2 million at the peak of the boom in 2013 to less than $400,000 in 2017.
Collins said those who bought properties in mining towns at the peak of the market faced significant financial losses, however the prevailing conditions presented opportunities for investors who were comfortable with the risk.
“House prices in these mining town are unlikely to reach the highs seen during the resources construction boom in the near-to-medium term, if ever again, but prices are now below replacement cost in some towns and yields are very high,” he said.
Sales activity has picked up over the past year after buyers neglected the market between 2014 and 2016, but risks remain.
“For those considering investing in the Pilbara, it’s important to understand the risks and have significant cash buffers set aside in the event of long vacancy periods,” Collins warned.
He said investing in regional locations isn’t typically suited to first-time investors, and is a better proposition for more experienced investors who have a portfolio of existing residential properties.
“With adequate research and careful decision making at the right stage of one’s investment journey, regional property can prove to be a good investment and generate wealth through income earning and capital growth avenues.”
The report said growing demand in the state’s South-West region would be underpinned by those seeking a sea/tree change.
Investors have the potential to capitalise on the region’s growing tourism market and use alternative strategies, including short-stay websites like Airbnb, to boost rental yields.
A strong gold price is currently driving the Goldfields-Esperance region, as well lithium, which is a key component of smartphone batteries and is used store energy from wind and solar farms.
More than 530,000 people currently live throughout regional Western Australian, accounting for around 21% of the state’s population.
Australian Property Journal
