Karratha
- Thread starter venno
- Start date
Been looking back around Karratha as the yields seem to back up to around the 10% mark now that sellers price expectations have finally matched the slide in rents.
Considering a 4x2 in Baynton that was built in 2001 and has a year and 4 mths left on the lease to a gov dept at 1900pw with no downward reviews as a clause.
The numbers stack up and its on a larger than avg block for a newer build with brick construction and colourbond roof.
I still wonder what way the winds blowing up there though, part of me thinks that with enough left in the lease I could ride out any short term issues as I think the med/long term outlook for Karratha is good.
Considering a 4x2 in Baynton that was built in 2001 and has a year and 4 mths left on the lease to a gov dept at 1900pw with no downward reviews as a clause.
The numbers stack up and its on a larger than avg block for a newer build with brick construction and colourbond roof.
I still wonder what way the winds blowing up there though, part of me thinks that with enough left in the lease I could ride out any short term issues as I think the med/long term outlook for Karratha is good.
Karratha is an interesting place at the moment.
There is ALOT happening to the town but it's all about expanding the town, lowering the reliance on industry and making it cheaper to live in town.
There is a crapload of land being released in the next 12 months, Jingarri in Nickol, Madigan Estate near Baynton and Mulataga at the end of town near Bulgarra.
There was an article in the local rag saying over 1000 blocks alone to be released in the next 12 months. Plus Pelago East and several other low rise projects being constructed and proposed in town.
Prices seem to have been steadily going down along with rents which is great for the town but no so much for the investment crowd.
Personally living here I would not buy a house here for an IP as I believe there is a lot more room for the market to drop over the coming couple of years especially the rental market.
There is ALOT happening to the town but it's all about expanding the town, lowering the reliance on industry and making it cheaper to live in town.
There is a crapload of land being released in the next 12 months, Jingarri in Nickol, Madigan Estate near Baynton and Mulataga at the end of town near Bulgarra.
There was an article in the local rag saying over 1000 blocks alone to be released in the next 12 months. Plus Pelago East and several other low rise projects being constructed and proposed in town.
Prices seem to have been steadily going down along with rents which is great for the town but no so much for the investment crowd.
Personally living here I would not buy a house here for an IP as I believe there is a lot more room for the market to drop over the coming couple of years especially the rental market.
I am yet to see an explanation of how the replacement value of a house i.e the house and land and other development costs, can be significantly reduced. The chinese transportable houses ended up coming in more expensive than domestic solutions. And should WA taxpayers continue to subsidise land so that sydney siders can get affordable rental properties? Replacement value will underwrite this market more so than any other market.
To really get prices down the govt would need to give the land away for $1 on the condition a house is built within say 12 months. This could knock about 20% of existing stock prices. It would also pee off an awful lot of people and cost the govt a fortune... one whose fiscal position is already battered as more and more wealth is extorted to the east coast.
To really get prices down the govt would need to give the land away for $1 on the condition a house is built within say 12 months. This could knock about 20% of existing stock prices. It would also pee off an awful lot of people and cost the govt a fortune... one whose fiscal position is already battered as more and more wealth is extorted to the east coast.
Yup. The best you'll probably get is 80% LVR and only 6% maximum yield.
Might be how the banks view things going (20% drop in prices to a 100% LVR to then equalise to an 8% yield [6%/0.8]).
Interesting times in K-town.
I spoke to a RA about a month back about where things were going. At that stage they'd just had a newish 4x2 (Baynton West) listed at 850K, a new low. She seemed to think that the vendor was a bit too pessimistic - will be interested to see if it sold, and if so how quickly.
Companies are apparently stil buying but the market for properties under lease (ie. the investor market) has disappeared.
If you look at the real estate sites - such as Crawfords - they're still talking things up (wonder why...) with mention of 'new projects' such as Karratha airport, Kintyre uranium, new port south of town, fertiliser plant.
Anyone know/have opinions on how rosy things actually are in this regard?
Moving on to the future, prices will need to be supported by
1. people wanting to live there or companies wanting to place workers - I think ongoing demand is going to be at least moderate, but a few new projects would help. Still, plenty of business going on now and into the future and that's not going to disappear ie. Karratha is far from a one-trick pony.
2. the 'floor' in prices, discussed above, based on construction costs.
Government wants to normalise prices, sure, but what does that mean? If construction costs $500K and land is $300K, is a 'normal' 4x2 house price 800K? What levers could the government pull to lower the actual construction cost? Can't really think of anything significant.
Landcorp prices have already been cheap for a long time, supply was initially low but land hasn't been the holdup for a while.
For me personally, I built to sell in Nickol West Phase One circa 2007 but decided the rents were attractive enough to hold. Still getting $101K gross (1950/week) with a long term government tennant, that's on a construction cost of 390K plus land so 589K all up. Gross return on purchase cost is about 17% and then depreciation makes it even more attractive.
But buying now at 850K for a newish house and getting about 1400/week would be 8.5%. Worth it?
One last thought - anyone know what construction costs are doing this year? Is there ANY sign of 'normalisation' in construction prices? If this was starting to occur, then I'd finally be worried there was a logical reason why the 800K floor was not going to hold.
I spoke to a RA about a month back about where things were going. At that stage they'd just had a newish 4x2 (Baynton West) listed at 850K, a new low. She seemed to think that the vendor was a bit too pessimistic - will be interested to see if it sold, and if so how quickly.
Companies are apparently stil buying but the market for properties under lease (ie. the investor market) has disappeared.
If you look at the real estate sites - such as Crawfords - they're still talking things up (wonder why...) with mention of 'new projects' such as Karratha airport, Kintyre uranium, new port south of town, fertiliser plant.
Anyone know/have opinions on how rosy things actually are in this regard?
Moving on to the future, prices will need to be supported by
1. people wanting to live there or companies wanting to place workers - I think ongoing demand is going to be at least moderate, but a few new projects would help. Still, plenty of business going on now and into the future and that's not going to disappear ie. Karratha is far from a one-trick pony.
2. the 'floor' in prices, discussed above, based on construction costs.
Government wants to normalise prices, sure, but what does that mean? If construction costs $500K and land is $300K, is a 'normal' 4x2 house price 800K? What levers could the government pull to lower the actual construction cost? Can't really think of anything significant.
Landcorp prices have already been cheap for a long time, supply was initially low but land hasn't been the holdup for a while.
For me personally, I built to sell in Nickol West Phase One circa 2007 but decided the rents were attractive enough to hold. Still getting $101K gross (1950/week) with a long term government tennant, that's on a construction cost of 390K plus land so 589K all up. Gross return on purchase cost is about 17% and then depreciation makes it even more attractive.
But buying now at 850K for a newish house and getting about 1400/week would be 8.5%. Worth it?
One last thought - anyone know what construction costs are doing this year? Is there ANY sign of 'normalisation' in construction prices? If this was starting to occur, then I'd finally be worried there was a logical reason why the 800K floor was not going to hold.
With regards to the future projects, there is a lot in the air I think.
Anketell Port has approvals but Aquilla doesn't have the funding to built it, FMG has put their plans for rail and port on hold.
Rio has been cutting back, sacked 50 managers the other day as part of "de layering" and has cut back from 500 houses to be built to roughly 200 houses, so obviously they don't see the need to house so many employees. Rio wants to automate a lot of stuff and get rid of more poeple up here, Trains and good solid couple of hundred residential guys.
One of the Bio Fuel/Algae plants is shutting up shop and going to SA as it's cheaper to produce. Aurora is still operating and expected to expand.
Fertilizer plant is always talking about expanding, yet to see it happen.
Woodside may expand Pluto now as the Browse Basin project is not going to be done at James Price Point now, so thats a watch this space.
But there are still plenty of big projects in the pipeline, but most of them are exactly that in the pipeline and not approved but there is plenty going ahead.
Regarding construction costs, they seem to have come down.
H&L Packages for the 700 mark recently for a medium spec property.
Biggest issue is the banks wont lend up here at the moment, talking to a RA the other night it's becoming quite serious as 'locals' cant get finance and they aren't prepared to fork out 14k for a bond so are moving on.......
Also there doesn't seem to be as much work around as there was, all the camps are now selling nights in their rooms and marketing themselves as 'Hotels' which has never happened in the 10 odd years I've been here.
It's a strange place, there will always be plenty of projects and demand for housing and Karratha is lucky in thats its a multi industry town, Hedland however is a different story and I wouldn't like to have anything there if the Iron ore price plummeted.
But with 2000 more lots being released on top of whats out on the market now and not selling it's interesting times ahead and prices can only go down to the cost to build a property. No more building and making 300-400k profits the day after it's finished thats for sure!
Anketell Port has approvals but Aquilla doesn't have the funding to built it, FMG has put their plans for rail and port on hold.
Rio has been cutting back, sacked 50 managers the other day as part of "de layering" and has cut back from 500 houses to be built to roughly 200 houses, so obviously they don't see the need to house so many employees. Rio wants to automate a lot of stuff and get rid of more poeple up here, Trains and good solid couple of hundred residential guys.
One of the Bio Fuel/Algae plants is shutting up shop and going to SA as it's cheaper to produce. Aurora is still operating and expected to expand.
Fertilizer plant is always talking about expanding, yet to see it happen.
Woodside may expand Pluto now as the Browse Basin project is not going to be done at James Price Point now, so thats a watch this space.
But there are still plenty of big projects in the pipeline, but most of them are exactly that in the pipeline and not approved but there is plenty going ahead.
Regarding construction costs, they seem to have come down.
H&L Packages for the 700 mark recently for a medium spec property.
Biggest issue is the banks wont lend up here at the moment, talking to a RA the other night it's becoming quite serious as 'locals' cant get finance and they aren't prepared to fork out 14k for a bond so are moving on.......
Also there doesn't seem to be as much work around as there was, all the camps are now selling nights in their rooms and marketing themselves as 'Hotels' which has never happened in the 10 odd years I've been here.
It's a strange place, there will always be plenty of projects and demand for housing and Karratha is lucky in thats its a multi industry town, Hedland however is a different story and I wouldn't like to have anything there if the Iron ore price plummeted.
But with 2000 more lots being released on top of whats out on the market now and not selling it's interesting times ahead and prices can only go down to the cost to build a property. No more building and making 300-400k profits the day after it's finished thats for sure!
Listening to Macca on the ABC Radio this morning (Sunday) and a local from Karratha stated that things have slowed down over there which was evident by the amount of Industrial Equipment (e.g. excavators and large mine vehicles) being held in the local hire companies yards that was once all out on projects/mines in the area.
He also mentioned the large amounts of properties that were for sales in town and how once it was impossible to find rentals or too expensive to buy a place but now it is so much easier to obtain accommodation in town. He stated he lived under a bridge just out of town when he arrived in the area but now that's not required.
Interesting how this will impact on those with IPs who paid top $$$$ thinking the bubble would not burst.
He also mentioned the large amounts of properties that were for sales in town and how once it was impossible to find rentals or too expensive to buy a place but now it is so much easier to obtain accommodation in town. He stated he lived under a bridge just out of town when he arrived in the area but now that's not required.
Interesting how this will impact on those with IPs who paid top $$$$ thinking the bubble would not burst.
Housing availability in Hedland is set for a major boost with the construction of the 293-unit Osprey Service Workers’ Village on 10ha of land, set to start in South Hedland in September.
"Rent prices will be set at about 40 per cent below market value, to provide service workers with access to affordable living options,"
By 2017, the Govt will have delivered more than 7,000 new dwellings in Hedland
from dhw
Any idea as to how much these cost? I'm curious.
can't really recall now... I think the house and lands were about $800k, so the house was probably around the $500k mark. It's the cost of freight, cyclonic fencing, cyclonic store rooms, quality air con units, heat pump hws, concrete etc that pushes the price up
Whilst it costs $800K for a quality 4x2 it will keep on renting for $1200 to $1500pw.
That's probably be the underlying price support.
Sure, they'll be things less than that, but that will be older less sought after stock.
My short cul de sac in Karratha currently has 3 vacant houses. One has been vacant for 4 months.
The Fertiliser plant is well underway, with ground work almost completed.
This is the problem with regional towns. As much as I love Karratha and Port Hedland (I once owned a house in both places), its an incredibly bi-polar market.
When yields are high, they are astronomical. And then, when hard times come, there is zero yield (and still a mortgage to be paid).
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Makes you wonder how they can build so cheap in comparison in places like Gladstone, Mackay, Townsville, Cairns, Darwin etc.
All these places have freight, cyclonic fencing, cyclonic store rooms, quality air con units, heat pump hws, concrete etc as well and manage to do it.
I think its greed by the builder and or acceptance of gouging by the mug paying the bill.
Karratha update anyone?
Hi, I'm newbie to this site, and am impressed with the thread.
Does anyone have any updates on the Karratha situation ATM?
I live/work/own property here but am a bit out of the loop atm.
All I have heard is rumours around town that contracts have been awarded already for Anketel and that it's going to happen. I read that Woodside is looking for gas for another Pluto train also??
Also heard something on the resources report today about RIO doing another expansion??
What is the real truth behind the hype and these projects happening?
Also If/when these projects go ahead, could this be the beginning of the next property cycle?
I know of a few guys up here with large portfolios are buying up large atm. Do they know something I don't? Or are they just speculating?
When the next big thing is announced could it be time to pounce?
Although there will be available land to begin with the projected population of 50k over the next 15 years will require thousands more homes, so could there still be a few supply/demand rent spikes to come as the ratios change?
Any insights are appreciated
Hi, I'm newbie to this site, and am impressed with the thread.
Does anyone have any updates on the Karratha situation ATM?
I live/work/own property here but am a bit out of the loop atm.
All I have heard is rumours around town that contracts have been awarded already for Anketel and that it's going to happen. I read that Woodside is looking for gas for another Pluto train also??
Also heard something on the resources report today about RIO doing another expansion??
What is the real truth behind the hype and these projects happening?
Also If/when these projects go ahead, could this be the beginning of the next property cycle?
I know of a few guys up here with large portfolios are buying up large atm. Do they know something I don't? Or are they just speculating?
When the next big thing is announced could it be time to pounce?
Although there will be available land to begin with the projected population of 50k over the next 15 years will require thousands more homes, so could there still be a few supply/demand rent spikes to come as the ratios change?
Any insights are appreciated
