House-buyers seeking a bargain amid the wreckage of Australia's mining boom might want to get in quick.
Port Hedland, a shipping hub for the Pilbara iron ore region in Western Australia, saw house prices collapse nearly 70 per cent in the past four years as workers lost their jobs and left amid the end of a resources investment boom. But prices there have reached a bottom and are now even rising.
"We're starting to get multiple offers on properties," said Peter Dunning, a real estate agent at Ray White Group, who says local values have risen about $50,000 in the past six months. Photo: Erin Jonasson
"We're starting to get multiple offers on properties," said Peter Dunning, a real estate agent at Ray White Group in Port Hedland, who says local values have risen about $50,000 in the past six months. "People realised that prices had got so cheap, they probably weren't going to get any cheaper. So they started buying."
Brighter spots in housing is one of three chunks of evidence adding to a growing sense that resource-based state economies are improving. The RBA's liaison with businesses and its data analysis show emerging signs that the Queensland and WA slowdowns are coming to an end, it said earlier this month. The regions' jobs markets, meanwhile, showed a healthy pickup in April.
The recent commodities rally has laid a foundation for recovery. While the price of iron ore — the country's biggest export — has slipped after unexpectedly rebounding toward the end of last year, it remains well above the lows beneath $US40 seen in late 2015. Still, there is potential for the steel-making metal to fall further as No 1 trading partner China stockpiles its holdings.
Port Hedland last month approved BHP Billiton's request to boost the amount of iron ore it ships through the port by 5 million tonnes to 275 million tonnes a year, after the miner initially sought an increase to 290 million tonnes. Coal-mining Queensland, meanwhile, is starting to reap benefits from large-scale liquefied natural gas projects coming on stream.
No boom seen
A CoreLogic report earlier this month found that many mining towns across the country were seeing sales volumes of houses lift and the rate of price declines starting to slow. But it's still a far cry from the good times, when median prices in the fly-ridden, cyclone-prone outpost of Karratha, the Pilbara's biggest town, topped Sydney's by 49 per cent.
Nobody's expecting a return to the boom years, when mining workers with no degrees were commanding salaries akin to that of Wall Street bankers. The bonanza lasted for much of the decade though 2012. But recent green shoots bolster the RBA's case that the unwinding of the mining investment boom is almost done, as the central bank seeks to diversify the economy toward services industries.
Drivers of growth in mining states appear to be broader-based than just commodities. WA is getting a $2.3 billion overhaul of its roads and rails, with a new 60,000-seat stadium also under construction, while works are well underway on the Gold Coast in preparation for the city hosting next year's Commonwealth Games.
Queensland "has got a pretty good spread of industries, for example tourism and education, so once the worst of this mining pullback is done, then the prospects are pretty good", said Steven Milch, chief economist at Suncorp Corporate Services.
'Slowly picking up'
Deloitte Access Economics is also optimistic about Queensland. It forecasts the north-east state to grow 4.5 per cent in fiscal 2018, outstripping NSW's 3 per cent and Victoria's 3.4 per cent. Growth in WA, the state hardest hit by the mining downturn, is tipped to accelerate from 0.2 per cent in fiscal 2018 to 2.2 per cent the next year.
ANZ Bank gave a tempered assessment in a May survey: "While activity in Western Australia continues to expand well below trend pace, the weight of the downturn is lifting." The bank's Queensland index also improved, but it said that labour-market slack was still a drag on economic activity.
April data showed improvement in the resource states' job markets. Queensland added a net 62,100 roles in the six months through April, the most of any state during the period. WA's jobless rate dropped 0.6 per centage points to 5.9 per cent, the biggest decline in almost two years.
"It is busy over here," said Guy Fulcher, a recruitment consultant at Zenith Search agency in Perth. "It's been slowly picking up in the past 12 months. It's still nowhere near where it was in the boom time, but compared with how quiet it was, it's a lot better."
'Skull and crossbones'
With soaring property prices in Sydney and Melbourne far out of reach for many workers, some economists also expect to see northward migration to Queensland increase. That might go some way to easing an apartment supply glut in Brisbane, which the RBA has identified as a significant restraint on prices in the state's biggest city.
It's still a stretch to suggest that resurgent mining states can pick up Australia's growth baton should east-coast property markets stutter.
Back in Port Hedland's real estate market, Dunning said he's also seen a sharp drop in rental vacancies, usually a sign that employers are in hiring mode, while buyer demand is almost entirely from owner-occupiers. He says the real gains won't come until a different type of bargain hunter reappears.
"Nothing will happen dramatically until the investors start to come back," said Dunning. "For investors, Port Hedland has got a skull and crossbones on it."