Karratha slowdown?

[Gentle_Chief]

Hiya guys,

What's your opinion - Do you think Karratha has slowed down in the recent years?

Karratha prices have been rather flat since '06 and '07 whilst its neighbour Port hedland & S.Hedland have moved up by atleast 50% in the same period.

If so, is it because of all the High rises being built and supply-side of accomodation being available more readily in Karratha.
And secondly the ever abundent aspect of new Land releases by the Shire?

I have been invested in other Resource towns in Queensland & WA since '07 and they have had nice little growth in the past years - both in CG and CF.
I believe, as I have tracked Karratha since that period and also once the darling of resource town investments has rather been very sluggish/inactive.

Look forward to your opinions?

Thanks,

 

[Aaron Sice]

lots of land releases by state govt supressing prices somewhat in Karratha.

PH has nowhere to go, except up.

 

[Gentle_Chief]

PH has nowhere to go, except up.

Aaron, what make Port Hedland so much more better than Karratha?

 

[Aaron Sice]

Aaron, what make Port Hedland so much more better than Karratha?

in my opinion, because that's all there is (opinion, not mine), PH is very limited with how far it can expand, or spread. There are serious native title issues because of the tidal flats and this is one reason why South Hedland is doing so well - there's room to spread out a bit down that way.

PH is apparently still in the throes of Amendment 22 for the West End which will see "no maximum zoning" and is the reason why those dual street frontage 1012sqm lots are fetching $1.2m+.

so essentially, it's almost landlocked. think Syndey - but with demand.

 

[Belbo]

Hey, steady Eddy! Sydney's got demand, it's just a wee bit selective.

(Actually, go Hedland I say!)

 

[Marti]

South Hedland seems to have been stronger for longer.. both in capital and rental growth, but we have had a good six month rental increase result of just over 9 per cent in Karratha.

Also, interestingly South Hedland properties seem to sell showing a return in the region of 10 – 11 per cent, while Karratha sell at around 9 per cent return. Anyone know why?

 

[BV]

so essentially, it's almost landlocked. think Syndey - but with demand.

And where is the demand coming from
but most importantly what are investors going to do when there is no more population growth?

 

[Gentle_Chief]

Also, interestingly South Hedland properties seem to sell showing a return in the region of 10 – 11 per cent, while Karratha sell at around 9 per cent return. Anyone know why?

Is it that investors deem Karratha as less risky compared to Port Hedland and S.Hedland and hence are willing to settle for a lesser rate of return?

 

[Belbo]

And where is the demand coming from
but most importantly what are investors going to do when there is no more population growth?

Good heavens! It's not a lifestyle location of choice, BV. It's a growing resource industries hub, set to become the largest such port in the world measured by output over the next 10 to 20 years. Build it and they will come (unless the developing world collectively packs in the towel and decides mud huts & animal dung fires actually do offer the more desirable lifestyle after all).

Where again precisely are you in holiday mode: Siberia?

 

[BV]

Where again precisely are you in holiday mode: Siberia?

Haha I know you would have liked that, but no I'm not going there.
I'm off to Southern Europe very shortly (Greece & Italy)
Last year we didn't have time to see everything and we also had the kids with us. This time we are going alone.

 

[Ausprop]

I recently sold karratha on an 11% yield. If the suggestion is that karratha has under performed because it hasnt gone up 50%, then I think we need a reality check. $1m for a basic 4x2 renting at $2000-2500 is really as high as any sane person could bear? i don't think any good would come of prices going up to $1.5m

 

[HiEquity]

I recently sold karratha on an 11% yield. If the suggestion is that karratha has under performed because it hasnt gone up 50%, then I think we need a reality check. $1m for a basic 4x2 renting at $2000-2500 is really as high as any sane person could bear? i don't think any good would come of prices going up to $1.5m

Hi Ausprop

Can I ask with that cashflow, why did you sell? We're just sitting on ours and enjoying the income... it has gone up $125k in two years according to the latest val in K-town but the transaction costs would see to most of that if we sold.

 

[Belbo]

Haha I know you would have liked that, but no I'm not going there.
I'm off to Southern Europe very shortly (Greece & Italy)
Last year we didn't have time to see everything and we also had the kids with us. This time we are going alone.

Scoundrel: May the fleas of a thousand camels infest your jockstrap!

(Please, Sir: Can I come?)

 

[Ausprop]

Hi Ausprop

Can I ask with that cashflow, why did you sell? We're just sitting on ours and enjoying the income... it has gone up $125k in two years according to the latest val in K-town but the transaction costs would see to most of that if we sold.

it was with great reluctance, however I had the opportunity to get out of it tax free and the equity was more useful elsewhere... too many vacant blocks that I need to churn thru. I also have some reservations about the sustainability of it all, but perhaps I need to snap out of it. there is a danger that some of these major releases could flood the market. I achieved an above market rent and then sold above market. I figured if I can get out without paying tax, then my only real loss is the stamp duty to get back in.

With how things have panned out I probably shouldnt have done it, alas no point looking back.

 

[BV]

I recently sold karratha on an 11% yield. If the suggestion is that karratha has under performed because it hasnt gone up 50%, then I think we need a reality check. $1m for a basic 4x2 renting at $2000-2500 is really as high as any sane person could bear? i don't think any good would come of prices going up to $1.5m

Ausprop
I think you did the right thing

 

[Gentle_Chief]

I recently sold karratha on an 11% yield. If the suggestion is that karratha has under performed because it hasnt gone up 50%, then I think we need a reality check. $1m for a basic 4x2 renting at $2000-2500 is really as high as any sane person could bear? i don't think any good would come of prices going up to $1.5m

Hi Ausprop,

It would concern me as a Karratha investor (especially in a resource town where I am taking a higher element of risk) if the property values were stagnant. If I bought a 4X2X2 for a 1 million in 2006 and is still woth 1 million today, then it is a poor purchase in my opinion. Irrespective of the 10% yield where the cost of funds are 7.5% and other costs such as council, repairs, insurance etc make up another 2%. With a few week vacany between tenancies it could all be wiped out. And a Karratha investor would be left with nothing much...

On the other hand, Port Hedland and South Hedland have gone from mid 400s to 700s today. Between 2006 and 2011. With the same 10% yields as in Karratha.

 

[whitey]

Karratha 3x1's were about 180k when i moved there. That's pretty fair growth since 2003 i reckon, if youd bought then.

Landcorp have done a good job relative to port hedland in getting land online.

I'm now living in pretty pool and whike there's speculative talk of new land releases realistically the topography (cylone storm surge prone land) is going to mean little comes on line in the next few years.

South hedland has performed brilliantly over the last few years. It's got a lot more social problems than port and more land avalability, and no coastline. It's not a town i would ever live in (and im up to 8 years in the pilbara, so im not all that picky!). I've personally always been hesitant to invest in it fornthose reasons. Poor choice in hindsight, but given the current high prices i still think those concerns are valid (for me).

'pilbara cities' plans should see karratha pop contnue to expand over the next generation. Interesting to reflect on what this will do to the prices.

 

[Gentle_Chief]

Karratha 3x1's were about 180k when i moved there. That's pretty fair growth since 2003 i reckon, if youd bought then.

Landcorp have done a good job relative to port hedland in getting land online.

I'm now living in pretty pool and whike there's speculative talk of new land releases realistically the topography (cylone storm surge prone land) is going to mean little comes on line in the next few years.

South hedland has performed brilliantly over the last few years. It's got a lot more social problems than port and more land avalability, and no coastline. It's not a town i would ever live in (and im up to 8 years in the pilbara, so im not all that picky!). I've personally always been hesitant to invest in it fornthose reasons. Poor choice in hindsight, but given the current high prices i still think those concerns are valid (for me).

'pilbara cities' plans should see karratha pop contnue to expand over the next generation. Interesting to reflect on what this will do to the prices.

So Whitey, your money is on Port Hedland in the Pilbara towns?

 

[whitey]

So Whitey, your money is on Port Hedland in the Pilbara towns?

I built in karratha because that was where i coukd get land for an ip. That was around 2008 and the cg and cashflow have both been good. Cost me 590k for. 4x2 in nichol west overlooking the park. I planned to sell on completion cos i was worried about prices heading down as new land came online. Have held on to it as i've grown addicted to the positive cashflow.

If i could get a block in port hedland i'd happily build another ip, but i can't. Port's noving along nicely as a town and supply of land will be limited in at least the medium term. I live here now, having recently moved up the road from karratha. I haven't bought an ip here, just because ofnthe current costs of doing so. Not saying its a bad investment, just prices are too high for me to not worry about the downside.

South hedland - im scared of investing 900k there, just because its south hedland. Too much money for somewhere that i and most people will never want to live.

Of the 3, port is the one i can imagine as a lifestyle/pretige location for pilbara residents in a few years time. Good coastal development in recent years. Cranes up the road building a new deli by the beach. Simon crean here yesterday opening the new yacht club. That sort of thing.

 

[Ausprop]

Simon crean here yesterday opening the new yacht club. That sort of thing.

a hard core left wing unionist opening a yacht club?