Karratha WA

G'day guys,

Just had a quick trip down the West coast to Broome, Karratha, Dampier etc. I couldn't believe some of the prices / rents offered in this part of the world. A couple of quick examples from the "Pilbara News".

For Rent
Karratha - 4 x 2 - $2500 per week
Karratha - 2 x 2 - $3900 per month
Dampier - 3 x 1 - $1300 per week

For sale
Karratha - 4 x 2 - $1.15m (Renting at $104k pa)
Karratha - 3 x 1 - $750000

While this is too rich for my blood, I would be interested to see if anyone here believes this is sustainable for the long term. There seems to be construction going on everywhere. I even had a tour of Woodside; the level of mining and associated revenue is absolutely staggering, as well as the amount of research being conducted into new oil and gas fields. According to Woodside, they will be providing their products for many years to come. Interested in the thoughts of others.

Phil :)
 
Hi Phil,

kph and myself own a construction company operating in that region and at the moment primarily building in karratha. I believe totally in the sustainability of this market and am continuing to invest personally in it myself. when you see what it costs to actually build a house in these areas you will ifnd that the sales prices are reflective of replacement cost.

it sure is a brave new world up there and there are many hotspot areas you haven't mentioned.
 
Phil,

If you get the latest issue of Hotspotting, the prices in north WA are why Geraldton has been mentioned in the top 10 places for growth nationwide this year. With up to 12 iron ore projects and the deep water port at Oakajee coming on line in the next couple of years, the authors see similarities in both regions. The Geraldton median in currently in the 300ks. Obviously Geraldton is closer to Perth, and a larger regional centre to begin with.

I am having a think about this now.

Cheers

Tulip
 
Hi Phil,

kph and myself own a construction company operating in that region and at the moment primarily building in karratha. I believe totally in the sustainability of this market and am continuing to invest personally in it myself. when you see what it costs to actually build a house in these areas you will ifnd that the sales prices are reflective of replacement cost.

Hi Ausprop,

I enjoyed my visit to the region; absolutely amazing scenery. I also spoke to Defence and Customs agencies there. They were quoting about $1M for the construction of new houses which will be used for their employees who are posted there. Having never previously been to this part of the world, I was totally amazed at the place.

Phil :)
 
Hi Ausprop,

I enjoyed my visit to the region; absolutely amazing scenery. I also spoke to Defence and Customs agencies there. They were quoting about $1M for the construction of new houses which will be used for their employees who are posted there. Having never previously been to this part of the world, I was totally amazed at the place.

Phil :)

I was working in Karratha for 3 mths as a vacation student back in 1999 (for Woodside), and I remembered back then each of us stayed in individual houses without sharing.. The cinema was showing movies 2 mths old, and the only place I hanged around consistently was the swimming pool in the town (not much of a drinker, so skipped Karratha International frequently during the weekend). Would really love to revisit the area again hopefully soon enough, as I'm seriously thinking about getting a job with Woodside again.
 
As a senior HR "person" for an engineering/contruction company responsible for a big part of the current expansions occurring up that way, we would not blink at paying $2500 per week for a property for a supervisor and his family to reside in.

And we'd pay them $250k a year on top of that .....

It still blows me away !!:eek:
 
Phil,

If you get the latest issue of Hotspotting, the prices in north WA are why Geraldton has been mentioned in the top 10 places for growth nationwide this year. With up to 12 iron ore projects and the deep water port at Oakajee coming on line in the next couple of years, the authors see similarities in both regions. The Geraldton median in currently in the 300ks. Obviously Geraldton is closer to Perth, and a larger regional centre to begin with.

I am having a think about this now.

Cheers

Tulip

is this a magazine? where do i get it?
 
Hi Phil,

kph and myself own a construction company operating in that region and at the moment primarily building in karratha. I believe totally in the sustainability of this market and am continuing to invest personally in it myself. when you see what it costs to actually build a house in these areas you will ifnd that the sales prices are reflective of replacement cost.

it sure is a brave new world up there and there are many hotspot areas you haven't mentioned.

I agree completely, the continued expansion of the BHP, Rio and Fortescue iron ore operations, as well as other miners such as Woodside and Citic Pacific (there are also plenty of others) will ensure the extreme shortage of housing continues for some years. This, combined with the amount of money these companies make from their operations means that they will continue to be more than willing to meet these prices.

Regards
Alistair
 
To help balance the picture being painted about Karratha (which I agree will be a good thing for quite a few years to come for people doing their research and making sound decisions), whilst doing our bit for our footy club and the Clean Up Australia day last weekend, we traipsed many streets in Bulgarra abutting Maitland Pde.

Nearly every 7th to 9th house (very old fibro / weatherboard / besser brick construction) is up for sale and appear to have been for some time. Now a number of these people will walk away with a very tidy profit indeed, especially if they are long term owners. But the ones who bought in at extremely over the top prices i.e. $600K + within the last 2 yrs may get burnt big time (if they are not already under severe mortgage stress). They might very well be pulling $1200 / wk rent but this won't cover the mortgage and outgoings. New owner occupiers will be spending all of their $140K (less tax) incomes on surviving!!!

The buying frenzy has definitely waned with the interest rate rises of recent times.

The real estate pages in the local rag have also swollen rapidly from this time last year where each agent would only have 6 - 10 listings, they are now back up to 18 to 24 listings each. Rentals are also being advertised again as landlords are getting greedier and asking obscene rents, so tenants are less forthcoming. Companies are also building mega camps for FIFO staff and they are also being quite selective about the type of dwelling they will lease from landlords.

By all means buy into Karratha (I am and will continue to do so)......but be very, very careful!!

Cheers,

Ian.
 
But the ones who bought in at extremely over the top prices i.e. $600K + within the last 2 yrs may get burnt big time (if they are not already under severe mortgage stress). They might very well be pulling $1200 / wk rent but this won't cover the mortgage and outgoings.

gees Ian, if they can't make it work on that yield what would it take?
 
G'day Ausprop,

The yield on the surface appears outstanding in gross terms. But, the reality is that with all the other extreme expenses / outgoings involved in living in Karratha (huge council rates, cyclone insurance, p#ss poor property mgt, $1.90/ltr fuel, extortion in groceries and so on....) there ain't much of a yield left.....especially if you are mortgaged to $600K.

Regardless of what you see on 'A Current Affair', not everyone here is on $140K per annum.

As I stated earlier: For the people that have bought older snot boxes for $600K + over the last few years........they are going to get burnt. They are the properties that are up for sale at the moment and they definitly are not being resold for $700K - $800K....in fact they are not moving.

I would also challenge the statement of replacement costs being $1M....this is definitely not the case. Current sales of some newer 4BR houses have exceeded this mark slightly, but to purchase land in a recent Landcorp ballot (600sqm approx $230K - $270K and building costs for 3x2 to 4x2 in the order of $400K +.

I have in the last 6 months taken delivery of keys to 2 (2x2 villas....glorified tin sheds) which cost $70K for each 300sqm lot plus $247K for each dwelling. I have just purchased a courtyard lot of 450sqm in Landcorp ballot for $169K for 450sqm; this will have a 2x2 built (for FIFO workers who don't wish to live with 5,000 other workers in a camp), steel frame and corrugated iron clad for $295K.

Hey, if you can pay cash and have little or no mortgage then yes the yields are sensational........but if you are going to be mortgaged to the hilt in Karratha............as I said before.....be very, very careful!!!
 
p#ss poor property mgt, ..

When I was there, there was a tree in front of my house that is tall enough to touch the powerline. PM was told about it several times and nothing was done about it. Cyclone came during Xmas, and that tree snapped and dragged the powerline to the front door of the house. Going in and out of the house was pretty scary. Disappointed to hear that PM has not improved after all these years..
 
I have just purchased a courtyard lot of 450sqm in Landcorp ballot for $169K for 450sqm; this will have a 2x2 built (for FIFO workers who don't wish to live with 5,000 other workers in a camp), steel frame and corrugated iron clad for $295K.

We are trying to introduce a better product into the market than just tin sheds (our homes are typically 8 star energy rated). Landcorp are encouraging alternative constructions but the whole process is failing. Indeed it is getting so expensive to build up there that ballot winners are reportedly handing their blocks back.

check out lot 293 Warbler Loop, Nickol (street # 21). drop me a PM if you want to explore building in this style.
 
Good to see both sides of the argument, and g'day Ian!

There was a 2 day talkfest ( another one) attended by all the 'fly in fly out again' big wigs for the usual photo shoot, complete with stubbies in hand ( yes I'm jaded and cynical), in Karratha to talk about housing problems, and sustainability, etc etc.
I was told Lend Lease attended and presented a master planned community vision. It was also suggested that locals are sick of hearing about this 'boom' as it suggests that a bust is round the corner.
All concerned have agreed that it is sustainable and long term in nature and that more infrastructure spending needs to happen for the town.
Govt is taking notice but they are slow to move.

Ther is no question that the town will continue to grow and this will happen quicker once the question of housing affordability is addressed, and Landcorp and the relevant minister are finally being more proactive on the ground to address this problem

And btw, the affordability will come and pretty soon as Landcorp are finally agreeing to engage with preferred builders who are the ones that can provide the housing at lower rents and prices, to overcome the current 'greed' in the market.
So yes, rents will come down and so will the price of new houses in teh Landcorp released subdivisions.

kp
 
Evening All,

Further to the Karratha discussion (KPH & Ausprop may already be aware of this) I was having a chat with building company rep today and I asked if there was anything new on the 'release of land titles' front.

For those of you who might not be aware, the latest land ballot in Karratha went ahead with a disclaimer being that titles were not available, but all efforts should be made to ensure they be available by 28 Sept. '08. This means that council applications to build, builders docs and bank docs can in reality go nowhere until the titles for the allotments are released.

The rep indicated he had heard through his reliable source that title release could be as late as Oct, possibly early Nov. What this means is council, builders, banks all wind down and nothing happens over Nov through to end of January. So effectively there would be little or no progress until Feb '09 for owners of the Nickol West Stage 2 release......of course there is also the outside risk of cyclone rains slowing progress too.

I guess this is all synonymous with the state's initials being 'WA' (Wait Awhile).

Cheers, Ian.
 
Ranges by Rapley's

Hi all,

Well I still have my investment property in Karratha. It's a Rapley's 4x2 new build earning $1600pw for the last year but due to increase to $1700pw. The mortgage amount is $600K. So it still covers the mortgage and even my own personal mortgage. The capital value has alos increased to around $900K if were to list it. Ian is right what he is saying in that you will get burnt if you uy one of the old dumps for a high price and expect to make a killing. The big companies only wish to lease modern clean home (<5yrs old) for their people.

I'm about to invest again up there in the latest offering. A 1br serviced unit in a resort style complex to be built by RW. Consturction is due to commence this Oct and finish by mid 2010. Prices are fixed and firm with the 1r unit priced at $615K. Sounds very expensive, yes, but again you are looking a high yeild in the order of 9%+. It is also the sort of accomodation that the areas is needing. The four exisiting short stay places are aging and have occupancy rates running at 90-95% with $275 pn for a 1 br room unit. It's only going to get worse before it gets better. Don't be shy get in a check it out if you are keen on positive cash flow IP's.


Michael
 
'Evening all,

Michael, not sure how far committed you are with 'The Ranges' but just some food for thought.

I received Darryll Green's email flyer this arvo on this project and his attached 'map' showing billions of dollars of investments neds to be taken with a grain of salt.

All the Woodside projects bar Browse are well and truly under way; LNG 5 is almost complete and Pluto construction is significantly progressed (not a lot of ongoing accommodation required); and Woodside have just granted the contract for construction of 60 family homes in Nickol West to a builder.

The RIO expansions are already well under way.

Chevron / Gorgon may well attempt to build an LNG train at King Bay, but this is small bikkies for labour and will not be happening any time soon. Gorgon is still earmarked for Barrow Island / Onslow so bugger all impact on Karratha accommodation.

Cape Preston is going to have it's own construction camp for incidental projects including ARH.

There are a multitude of FIFO camps going up around Karratha / Dampier as we speak (companies are trying to solve accommodation issues themselves); as you may be aware, the one opposite the cemetery is huge!!!!

The Ranges is on the site of the old drive-in half way between the shopping centre and the light industrial area (in no mans land....I struggle to come up with a worse location).

***Now the killer......Terry Leo has an application in with Council to build a series of three storey 1, 2 & 3 Br short stay accommodation blocks, the development running the full length of the Tambrey oval down the western side of the Tambrey Centre!!! From memory, something like 200+ rooms. He is allowed to build to the height of the spier on the Tambrey roof (7 storeys).

We were presented with the drawings by a concerned resident whilst at kids soccer training at the Tambrey Oval last Friday evening (we have 5 days to respond to council). Council only sent mail outs of the proposal to the three owners of privately owned houses on Tambrey Drive....the rest of the houses received nothing as they are company owned......nothing like stealth and surruptition. Oh and never mind the kids from the primary school losing a third of the oval space while the multi storey housing for all sorts of 'individuals' gets dumped in the middle of a residential and recreational area.

Mate, $615K to $925K for an apartment in Karratha??? Especially one by Rapley Wilkinson (it will be cheap and nasty, with any rent guarantee built into their asking price, you will get screwed blind by strata / management fees especially if it goes to the local First National franchise, as other local RW developments have). ***I have just opened the RW website and downloaded general info pdf. sheet....."you can expect expenses to account for 40% of your revenue for short term letting"!!! Short term <6mths stay management fees 14.5%, 9% for longer term. Annual refurbishment fee is $550. Ongoing strata levies for 2br single key room is $78/wk ($4056!!!) payable quarterly.

Karratha is dead (mass exodus of workers and residents) in December / January so bank on at least 20% vacancy especially in such a large letting pool.

In my view for what it's worth, The Ranges is a sensational cash cow.....for Rapley Wilkinson!!!

Cheers,

Ian.
 
Back
Top