Resourceful resurgence

A renewed interest in Western Australia’s resources is pushing up property prices in Karratha

The searing heat and clinging red dust are engulfing when you step off the aircraft in Karratha, Western Australia (WA). Immortalised by the country's poets and painters for generations, the sunburnt landscape is synonymous with the outback and is a stark reminder that you’ve arrived in one of the country’s fastest growing property locations.

Karratha is a northern coastal mining outpost with a population of 15,000 and a prime example of the economic fortunes brought to the state by an unprecedented natural resources boom, which has seen salaries, property prices and inward investment rocket. The red terrain of the town is home for Jedd and Suzy Griffiths. The couple arrived in 2000 from Western Australia’s capital city, Perth, a move they say has been both personally and financially rewarding. The former suburbanites have taken to county life and since arriving have had two children and established a thriving sign printing business.

Karratha’s residential streets are primarily filled with 1960s- and 1970s-built properties spread over one level on a large plot to accommodate sheds, swimming pools and expansive natural gardens, although the county’s fascination with the perfect sprawling grass lawn is difficult to aspire to in the heat of the north-west. The Griffiths’ decision to purchase a $220,000 three-bedroom property in 2000 proved truly life changing. “We first decided to buy in Karratha because it was becoming too expensive to rent and we didn’t see the point in paying off someone else’s house,” Suzy Griffiths says. “We sold our home six years later for $770,000.” The $550,000 profit enabled them to trade up and buy a four-bedroom home and workshop on a 1,350 sq metre block to accommodate their growing family and business.

Owner-occupiers are a minority in Karratha, with most property held by mining companies and investors, but despite this Griffiths says a tight-knit community has developed among long-term workers, with many looking ahead to further opportunities. “With the new mining boom set to start, the local economy is forecast for further expansion so we won’t be going anywhere soon,” she comments.

Western Australia’s growth did stall during the global financial crisis; mining projects were put on hold and house prices fell by 12 per cent on average. Amid renewed demand for iron ore, oil and gas exports, however, the state is preparing for strong economic growth, again driven by off-shore projects and the mining towns in the Pilbara region, such as Karratha.

Alan Bourke, president at the Real Estate Institute of Australia (REIWA) says it will be difficult to predict how the state’s mining property markets might evolve as the economy improves. In Karratha the median house price is $822,000, while average rents for similar properties are $8,000 per month. In contrast REIWA places the median house price in the state at $460,000 and average monthly rents at $1,410.

“Currently both house prices and rents are at record highs but this is not sustainable,” he says. “The state government is keen to release land and stimulate new housing construction to release price pressures in the north-west. Just how possible this is remains to be seen.”

Despite the price pressures, Karratha was named in the 2010 top 10 Australian property boom towns by prominent independent forecaster Terry Ryder. Research firm RP Data also named nearby Dampier (equal third with East Perth) in the nation’s top 10 most expensive suburbs to rent in December 2009. “East Perth has become a very upmarket area with many cafés and boardwalks surround by three-level homes and townhouses overlooking the canal. Here four-bedroom homes attract rents of up to $8,000 per month,” says Jan di Rosso at estate agency Ray White Uxcel.

Western Australia property doubled in value between 2001 and 2006 before being hit by the global recession. Di Rosso says first-home buyers and investors are now returning and are seeking improved returns in suburbs to the east of Perth, such as Morley and Bedford.

A 1960s house in Morley, which di Rosso has on offer at $450,000, is an example of the properties attracting first-home buyers and investors. The three-bedroom, one-bathroom home is nine minutes from Perth’s central business district but still within easy reach of the city’s fringes.

The emerging higher density living created by subdivisions is particularly attractive to fly-in-fly-out (FIFO) workers in the resources industry, such as James Gardiner, who seek city centre and airport proximity with the lock-up-and-leave potential of smaller properties. When he returned to Western Australia in 2007 after a number of years in London he bought an 18-year-old, two-bedroom ground floor apartment in Inglewood, 5km north east of Perth’s CBD.

Like many returning expats Gardiner was surprised by the area’s transformation, the prosperity of which is attracting luxury international retailers. Both Burberry and Tiffany & Co recently opened stores in Perth’s premium shopping district, King Street. “WA has changed a fair bit in recent years. The population is growing rapidly as people come here for work and Perth is expanding along the coast just as fast. We are also beginning to see a lot more high density living that will no doubt create a livelier city centre,” Gardiner says.

Like many West Australians he views property as a good investment. He sold an investment property in Perth’s outer eastern suburb of Gosnells in 2009 for $290,000. It had doubled in value in the six years that he had owned it. “I’m not sure if the doubling of returns will be seen again but any profit is a good one. I only wish that I bought in Karratha years ago!”

The riverside Perth suburb of Peppermint Grove became the most expensive property location in Australia in 2009, surpassing Sydney by $1.5m with a median price of $5.1m. It and the neighbouring Mosman Park have long been popular with wealthy buyers because of their riverfront location and proximity to beaches and the city centre, says William Porteous, at William Porteous Properties International.

In 1980 Porteous held the record for selling Australia’s most expensive home, for $2.15m. He smashed that in December 2009 when he acted as the agent for the country’s most expensive residential property transaction – the $57.5m sale of 43 Saunders, a five-bedroom, four-bathroom mansion fronting the Swan River in Mosman Park. In nearby Cottesloe Beach, Porteous is selling more affordable four-bedroom, four-bathroom luxury apartments priced from $4.35m. The new homes have ocean views and garage space for three cars. Despite the large prices he believes there are still opportunities for strong investment returns in Western Australia. “Medium term there will be big increases across the board,” he says.

Such increases are already being seen in another of Ryder’s top 10 towns, Bunbury, in the rural south-west of the state; a region famed for its big wave surfing and wineries. The town’s population of 31,000 is expected to grow 35 per cent by 2030 and according to REIWA it was the fastest growing regional property market in Western Australia in 2009, recording a 21.3 percent growth in median prices to $606,000, compared to a state-wide regional average of 1.8 percent growth.

About 175km south of Perth, Bunbury is a thriving tourism and leisure destination and it has been pinpointed for a potential $1bn mixed-use waterfront regeneration programme by Western Australia’s government. In the town centre, four-bedroom, two-bathroom properties with a living room and dining room sell from $550,000 to $1m, says Robert Geldert at Southern Districts Estates Agency, Professionals Bunbury. “We have strong overseas migration in Bunbury, with people attracted by our beautiful beaches and Mediterranean climate,” he says. The more rural towns on Bunbury’s outskirts are particularly popular with British expatriates. In River Ridge Estate, Australind, Geldert has one-acre riverfront bushland building plots on offer for $300,000.

Bourke is confident that Western Australia property market growth will continue, adding that interest rates have already been raised in response to a growing economy, now standing at 4.5 per cent.

“There is room for price growth. All things being equal, we expect modest growth in the order of one to two per cent each quarter this year,” he says.

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Estate agencies

Ray White Uxcel, tel: +61 89275 7777, www.uxcel.com.au, www.jandirosso.com

William Porteous Properties International, tel: +61 89386 8911, www.porteous.com.au

Southern Districts Estates Agency The Professionals, tel: +61 89721 3533, www.professionalsbunbury.com.au