Karratha or Gladstone

Hi i have just joined this forum and found the wealth of knowledge here very informative, I am a newbie investor with one property and chasing my second , i was looking at Karratha as a few work mates have done very well investing their but after reading up on the comments on this forum ,,now maybe Gladstone,
Living in Perth all my life i know very little about the Eastern states property market,,, so all help would be appreciated.:)
 
Karratha

Starting price range 800K +
Yields about 9% - 10%
Main driver - iron ore
Available housing stock - very limited

Gladstone

Starting price range about 300K+
Yields about 5% - 6%
Main driver - LNG, but also a bit more diversified
Available housing stock - buyers have a wider choice
 
Karratha does have Australia's largest LNG facility as well as lots of iron ore... and a heap of salt production. It supports a lot of offshore LNG activity as well. The cost of building new houses in Karratha is far higher than pretty much anywhere else in the country. It's not a particularly nice place to live so it's very much an investor's market and has a workforce with a high turnover and the highest salaries in the country. Karratha is massively strained by under investment in infrastructure for the community due to the historical focus on the risk of building stranded assets. Karratha is islanded from neighbouring communities so commuting from elsewhere isn't an option.

In the recent env approval, there is a requirement on Santos to build the temporary and permanent accomodation they require themselves in Gladstone. This will put a ceiling on price rises. I'm no expert on Gladstone but I'm led to believe the cost of new houses there is relatively low (compared to Karratha) and there is abundant developable land for expansion and a council who is all for it.

And FID on a new Gladstone development has yet to occur. Personally I think it is quite likely to occur however it hasn't yet... However environmental approval has recently been secured. I certainly view Gladstone as prospective but comparing it to Karratha is a bit like comparing apples and oranges. I can't see rents in Gladstone getting anywhere near Karratha - the circumstances are just too different.
 
A bit gambling if buying in Gladstone but what do you know? high risk , high return.

I think Gladstone is a much safer option, don't think there is much downside in capital values, potentially massive growth in rent and values.

The risk is Gladstone goes sideways for 5 years and the opportunity cost of where the investment could have been is the actual risk. Prices unlike to drop as it has all the infrastructure in place and the QLD govt will continue to push projects there so employment long term should be stable at very worst and price point is not overly high like Karratha.

Having said that i think there is some downside risk in paying $450k in the new estates, you can buy close to down for $350k and i believe little risk in those.


Good luck in your decision.

BT
 
Karratha does have Australia's largest LNG facility as well as lots of iron ore... and a heap of salt production. It supports a lot of offshore LNG activity as well.

and the Burrup Fertiliser plant. the economy is large and diverse

the main point is replacement cost. $400k wouldn't even pay for a 2 bedroom house to be constructed up there.
 
Gladstone is definitely my pick. I just settled yesterday on a 3 bed refurbished, fully furnished house on 868 sqm for $352k. It is renting for $360 pw now and I see that increasing in coming months.

The block is zoned high density residential, and talking to the council, they would rather I put units up, instead of subdividing. With future growth in Gladstone and the opportunity to build up to 6 units, it is a no brainer for significant capital growth. I see $1m profit as a realistic goal in the next 5 years from this purchase (put the house on another block that I subdivide, spend $200k per 2 storey townhouse and onsell each for $400k).

For the price of one house in Karratha you could buy 3 in Gladstone, while paying less in Stamp Duty. The chances of 3 Gladstone houses increasing in value by $600k ($200k each) is much higher than the chance for a $1M house in Karratha to increase to $1.6M.

If you are buying for potential capital gains and very limited downside potential, Gladstone has to be the way to go.
 
Thats 17% per annum for 3 years, that would be a minimum expectation for a booming Gladstone with 10,000 extra workers needed in that period.

Today = $350k
1 year = $409k
2 years = $479k
3 years = $560k
 
Thats 17% per annum for 3 years, that would be a minimum expectation for a booming Gladstone with 10,000 extra workers needed in that period.

Today = $350k
1 year = $409k
2 years = $479k
3 years = $560k

property moved bigger % in last boom in 2006.

it being so recent may effect how quickly it moves and moving off a higher base but it does show how quickly it can grow.

i know of some units that went from $125k to $240k in 12 months and are now around $230k.


cheers

bt
 
Thats 17% per annum for 3 years, that would be a minimum expectation for a booming Gladstone with 10,000 extra workers needed in that period.

Today = $350k
1 year = $409k
2 years = $479k
3 years = $560k

BOY... I really hope you are right.

Our plan is to sell our house in Gladstone in 5 years time and pay off debt. Hubbies work is not very stable and at 56 he and I don't want any more IPs.
If we can sell that house and pay down all the debt and buy 2 newish cars before retirement we will be happy! His retirement... not mine. Still have 20 years yet for me. Bummer...LOL
 
lets not get carried away.... expecting 17% as a minimum could lead to disappointment. there are many resons why karratha is what it is
 
Apples and Oranges ??

More like raisins and watermelons.

There are no comparisons to be drawn between the two other than the word LNG.

Clearly there has been little DD on the two to say that Karratha is an Iron ore town. Do you read the paper or watch the news?

GORGON, its Australia,s largest ever project, around $50Billion thats not to mention the countries second biggest ever with Pluto at $30Billion happening at the same time, then there's the third biggest ever starting up just up the road at $22Billion, along with Australia's second largest Iron ore facility, the largest salt export facility and its the only regional centre of significance for a 1000 miles.

Gimme a break, there will be ample housing and building opportunities in Gladstone for people to buy or build, the council is pro development, there is no native title to slow the release etc etc. The returns will never match. I expect the prices to and yields there to look good until the herd realise they can build their own for less. The cost of land plus the build is what you wanna do your sums on, not current demand as that can shift quickly.

I watched the Karratha market for 10 years before I took the plunge, amidst the advice of doom and gloomers, and let me say this. If I had of bought the first 4x2 I looked at at $375k, I would now have $1m in equity there, instead I waited until 3 years ago and got a 3x2 unit at $625k. It is rented on a 5 year lease at $1400pw and is now worth $825k. Not bad but if only I had got in earlier. The advice has always been that it can't keep going, but it has, and he who said that a 4x2 wont reach $1.6m there, you better get on line as they are starting to list at $1.5m already.

Karratha is a very unique market, and not one for the faint hearted, but if youv'e got the coconuts??

When I bumped into my bank manager there last year buying an IP at $1m I felt comfortable with mine.

Cheers.
 
Apples and Oranges ??

More like raisins and watermelons.

There are no comparisons to be drawn between the two other than the word LNG.

Clearly there has been little DD on the two to say that Karratha is an Iron ore town. Do you read the paper or watch the news?

Spot on Pango.

The two are so far apart that a comparison of any sort is fruitless!

To constantly hear people referring to gladstone as a 'mining' town, makes me shake my head a little.

It does have many and various industries linked to the mining industry but only one tiny mine in it's surrounds.

Rents will never reach Karratha levels or the same yield levels. Gladstone is accessible. Karratha is not.

Gladstone has had the most amount of land releases i have seen this past year, compared to the last 18 years i have been living there or returning to inspect properties.

There will be a shortage of properties, vacancy rates will tighten and rents will rise relatively quickly but people expecting the increasing construction activity to take Gladstone rents to Karratha levels are kidding themselves.

I'd love to see massive growth and i'm sure good growth is on it's way, but i think some of the hype should be tempered with a little caution and some realistic expectations.

Cheers

Rooster
 
Apples and Oranges ??

More like raisins and watermelons.

There are no comparisons to be drawn between the two other than the word LNG.

Clearly there has been little DD on the two to say that Karratha is an Iron ore town. Do you read the paper or watch the news?

GORGON, its Australia,s largest ever project, around $50Billion thats not to mention the countries second biggest ever with Pluto at $30Billion happening at the same time, then there's the third biggest ever starting up just up the road at $22Billion, along with Australia's second largest Iron ore facility, the largest salt export facility and its the only regional centre of significance for a 1000 miles.

Gimme a break, there will be ample housing and building opportunities in Gladstone for people to buy or build, the council is pro development, there is no native title to slow the release etc etc. The returns will never match. I expect the prices to and yields there to look good until the herd realise they can build their own for less. The cost of land plus the build is what you wanna do your sums on, not current demand as that can shift quickly.

I watched the Karratha market for 10 years before I took the plunge, amidst the advice of doom and gloomers, and let me say this. If I had of bought the first 4x2 I looked at at $375k, I would now have $1m in equity there, instead I waited until 3 years ago and got a 3x2 unit at $625k. It is rented on a 5 year lease at $1400pw and is now worth $825k. Not bad but if only I had got in earlier. The advice has always been that it can't keep going, but it has, and he who said that a 4x2 wont reach $1.6m there, you better get on line as they are starting to list at $1.5m already.

Karratha is a very unique market, and not one for the faint hearted, but if youv'e got the coconuts??

When I bumped into my bank manager there last year buying an IP at $1m I felt comfortable with mine.

Cheers.

If we are going to play the comparison game you forgot the following for Gladstone:
* Queensland Alumina Limited (QAL) – one of the largest alumina refineries in the world;
* Boyne Smelters Limited (BSL) – Australia’s largest aluminium smelter;
* Cement Australia (CA) – Australia’s largest manufacturer and distributor of cement;
* Orica Australia – the world’s largest industrial grade ammonium nitrate plant, a world scale sodium cyanide plant and a chloralkali plant
* Rio Tinto Alcan Yarwun – Alumina Refinery – the world’s first greenfield alumina refinery to be constructed since 1985

It also has a university campus, farming and other industry in the area. It is not totally reliant on LNG either. Gladstone Port currently exports 79 million tonnes per annum vs Dampier at 82 million tonnes. Gladstone is the 5th largest coal port in the world.

LNG projects:

The Australia Pacific LNG plant $7.7 billion - will create 10,000 jobs alone for Gladstone http://www.gladstoneobserver.com.au...sed-35m-lng-plant-to-create-up-to-18600-jobs/

BG Group recently signed Australia's largest LNG deal, for $60 billion, creating a further 5,000 jobs during construction in Gladstone - $8 billion cost.

Santos GLNG $7.7 billion - 3000 peak jobs

Gladstone LNG $1 billion - 120 jobs

Shell Australia LNG cost TBC - 2500 to 3000 jobs

Southern Cross LNG cost TBC - 300 jobs

Project Sun LNG $1.5 billion - 400 jobs

In total over 20,000 direct jobs, just from LNG construction not to mention the support industries required. The flow on effect in the economy will be huge.

For a town of 40,000, where will they house an extra 20,000+ LNG construction workers all earning over $100k p.a.? There are currently 200 houses for rent in Gladstone.

Future developments (non LNG) still to come also in the next 3-4 years:
* Gladstone Pacific Nickel $5 billion project - 2300 jobs
* Gladstone Port expansion $1.3 billion - 500 jobs
* Boulder Steel $1.4 billion - 1500 jobs
* Balaclava Island Coal $1.5 billion - 800 jobs
* Queensland rail $500 million - 350 jobs
* Gladstone water board $320 million - 400 jobs
* Arrow energy pipeline $480 million - 300+ jobs

So there we have another 6000+ employees required.

Including partners and children we are talking about doubling the population of Gladstone in the next few years.

The growth that has been seen in Karratha is still to come in Gladstone. There is no way that construction can keep up with demand for housing and we are starting from a much much lower cost base of just $350k.

Karratha's explosion in median house prices from $350k to $780k happened in just 2.5 years from mid 2005 to end of 2007. There is no reason Gladstone couldn't experience similar growth, as the same factors are present in Gladstone now as were in Karratha then. http://www.pdc.wa.gov.au/media/33605/karratha housing and land snapshot june 2008.pdf
 
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