Karratha - Sell or Hold

Q

Quattro

I have owned a 3x1 IP in Karatha rented for over $1500 per week (6 months left on lease) for over a year and am looking at selling due to the uncertainty of the market in karratha atm. The property was purchased for $705,000 last year and has just been valued at approx $825,000.

In speaking with the agents I would have though the property would be easier to sell with a lease in place however much to my surprise I was informed that they are selling easier at the moment when "vacant"??

Anyways, with all the new homes, land releases, looming mining tax, companies not taking on many new leases, plans for a "Biger Australia", mining accomodation camps etc.........Would you recommend we sell and realise our gains or ride it out for a couple more years ?

What do you see happening to supply and demand and market pricing (rents and capital growth) over the next 2 - 3 years in Karratha?

Like everyone..... I wish I had a crystal ball however I am certain many of you would have a better idea than me.
 
For me personally:

If you have borrowed most of the money to buy the properties, I.e. you are reasonably highly geared, then I would probably be offloading them.

It just feels like everything is absolutely in its peak at the moment and you would be carrying a significant risk going forward, without the prospect of even huger big gains etc. Sure the yields are fantastic, but the loans are pretty big to service too.

I would sell up, cash in, and look for the next places that are yet to boom up out of nowhere..
 
Hiya

Cant comment on the local market

right now it looks like u have made a wee profit after CGT ?

At 100 % borrow on 705 k at variable rates your weekly income should be quite nice.

I can see why u are asking the question because we are in major state of flux right now

id sit back and wait 2 weeks to see the outcome of the " non-election we had to have"

An allied q would be if I quit adn exit what to do with the cash ( if any)

ta
rolf
 
Thanks for the replies. I am sure many other Karratha investors are thinking along the same lines...........................

Rolf:

Your comments are spot on. Only last night we were thinking we will wait until after the election to finalise our decision. If we do exit and make a small profit, what to do with the money is the next big question. No doubt we will re-invest but wether or not the gains or investment will be better than in Karratha...Who knows ? I suppose we just dont want to sell now and wish we had kept the property for another 5 years...then again we dont want to be stuck with it if all goes pear shaped. I need that crystal ball.

Recruit 2:

Yes we are reasonably highly geared as we borrowed 100% against the property, especially as we have another commercial property in Perth (CF+). If we sell we can look at possibly another couple of properties however if we keep it I can prob only get a cheapie in the interim..
 
in and out costs are your largest. I can't see why you want to exit with such such strong cashflows. your house at that price cant be too far from replacement cost. People have been jawboning about the risk of the karratha market since way back before 1990. EOD cashflow will forgive all sins however it has been a saintly market for well over 20 years anyway
 
Ausprop:

Agreed.... however with one of the RE agents up there advising me that basically none of the large companies are currently renewing leases or actively seeking new properties to rent, once my lease runs out in 6 months time I worry about getting a new tenant, especially as the average family up there wont pay $1500 per week.

Without the companies leasing many properties, supply slowly catching up with demand and companies building their own houses / camps to accomodate workers etc, where does this leave the investor relying on corporate leases ?

I understand it has been a saintly market thus far, even for me getting in only last year however it does seem to be levelling out a little with many properties currently available for rent and for sale.
 
In looking at the feedback provided from the other writers i would agree and hold until the election is over. In QLD after talking to a large number of agents they are predicting a large number of property to come to the market post election, something to be mind full of.
 
Quattro said:
Ausprop:

Agreed.... however with one of the RE agents up there advising me that basically none of the large companies are currently renewing leases or actively seeking new properties to rent, once my lease runs out in 6 months time I worry about getting a new tenant, especially as the average family up there wont pay $1500 per week.

Without the companies leasing many properties, supply slowly catching up with demand and companies building their own houses / camps to accomodate workers etc, where does this leave the investor relying on corporate leases ?

I understand it has been a saintly market thus far, even for me getting in only last year however it does seem to be levelling out a little with many properties currently available for rent and for sale.
Click to expand...

Are you talking about on-site camps or the workers accommodation villages planned for KARRATHA?

From memory National Lifestyle Village should be about due in KARRATHA and Sea-Ripple Accommodation was a hive of activity on the last visit.

There is also the Kingfisher Stayover Village amongst many others

The Icon hotel does a pretty good steak :p

One of the girls from a local hire car company was telling us her and her partner are building locally and picked up a block in town for $180k..step 2 is expensive though, with everything costing a bundle beyond acquiring the land

I was recently up in KARRATHA and that airport just keeps getting busier and busier, expect paid parking soon, WOODSIDE and CHEVRON have also recently announced some big gas finds up that way, the exciting times continue ;)
 
Redwing -

Meant the workers accomodation villages ...........

Out of curiosity, any rough idea what a 3 x 1 brick and tile with a nice below ground pool and landscaping would cost to build ?

mmmmmm........steak !!!!!
 
Quattro said:
Redwing -

Meant the workers accomodation villages ...........

Out of curiosity, any rough idea what a 3 x 1 brick and tile with a nice below ground pool and landscaping would cost to build ?

mmmmmm........steak !!!!!
Click to expand...

Aaron (Blue Card) & Ausprop would definetly be able to assist here
 
We're holding. Rents have to fall a long way to be anywhere near as bad as capital city yields. And there are new projects still getting built up that way. Can anyone say "magnetite"? :rolleyes:

Redwing has already mentioned more gas - there's still room for extra trains at the NWSV and at Pluto on the Burrup. Construction costs haven't got any cheaper, for developers or the govt, and the worry of over supplying the market will probably hold back new construction anyway as per usual.

Not to mention the massive transaction cost in trading properties like this. If we didn't already have property there we would be buying...
 
A lot smaller but even Devil Creek is looking at adding more trains..and not the Thomas the Tank engine type ;)

Sino Iron Project is hoping to gear up and get those huge mills cranking over the next six months or so. The Powerhouse there needs gas from somewhere to get things rolling along the pipeline

Doing a search on KARRATHA there's lots happening in the area and much more planned for the future, the WA Government recently released a "City of the North" Plan for the town.

The WA government has also announced the selection of MAC Services Group as the preferred supplier to build and manage the 1180-workers accommodation camp on a 12 hectare site at Gap Ridge KARRATHA

And KARRATHA is not the only N-W Town with interesting projects planned

Significant Resource Projects-PDF 77.3kb
 
Last edited:
Quattro said:
Redwing -

Meant the workers accomodation villages ...........

Out of curiosity, any rough idea what a 3 x 1 brick and tile with a nice below ground pool and landscaping would cost to build ?

mmmmmm........steak !!!!!
Click to expand...

pool $35-50k, landscape $30k, fencing $30-40k (split with neighbours) external concrete $30k or so, air cons $15k

the house... probably $450k?
 
redwing said:
A lot smaller but even Devil Creek is looking at adding more trains..and not the Thomas the Tank engine type ;)

Sino Iron Project is hoping to gear up and get those huge mills cranking over the next six months or so. The Powerhouse there needs gas from somewhere to get things rolling along the pipeline

Doing a search on KARRATHA there's lots happening in the area and much more planned for the future, the WA Government recently released a "City of the North" Plan for the town.

The WA government has also announced the selection of MAC Services Group as the preferred supplier to build and manage the 1180-workers accommodation camp on a 12 hectare site at Gap Ridge KARRATHA

And KARRATHA is not the only N-W Town with interesting projects planned

Significant Resource Projects-PDF 77.3kb
Click to expand...


Agreed there is plenty in the pipeline but with all this work planned and the "supposed masses flocking to Karratha", would this not level out the supply and demand scenario aswell as the rents and property prices ?

Will the use of local building materials (possibly in the next few years) etc all reduce the cost of living and essentially the cost of housing and essentially the rents ?
 
redwing said:
Doing a search on KARRATHA there's lots happening in the area and much more planned for the future, the WA Government recently released a "City of the North" Plan for the town.
Click to expand...
The WA gov activity in the NW is a pale shadow of whats happening in QLD. When they release land at all, its in small parcels of a dozen lots. The cost of housing and rent is extreme due to a lack of available land and the cost of building being twice what you'd pay in Perth (for example).

Now if the government could partner with private developers and release an estate of, say, a thousand lots plus commercial support; some of the larger builders may be able to do a deal to build those houses affordably.
 
Quattro,

From articles and reports I've read (so not on the ground knowledge), Karratha is still experiencing massive under supply in accommodation isn't it? Miners still camping out in their cars, local hotel solidly booked and charging a fortune, more co's looking at establishing villages to cope with increased amount of workers, more land releases though still progressing very slowly, more resource projects popping up and existing ones expanding in a BIG way.

Now in the midst of this situation you have a property that's giving you some nice gains, paying for itself at 105% LVR and still putting extra cash in your pocket every week?

Yeah, definitely sell! :eek: ;)
 
build cost is actually about 3 times that of Perth. the govt sells the land at uneconomic rates, so if they sold them at true value, the 2 together give a large number. there is your intrinsic value. there is a lot of fundamental support for the prices these houses are sellign at
 
i would keep it i work up here in port hedland there is more and more work for future like somebody said they have been saying that prices will go down for years bet you they keep going up and the rent is great aswell id keep on to it
 
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