Port Hedland Australia's iron ore boom town - Aussiehome

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Hot spot | port hedland Chart 1: Australian ore exports 600 60 Volume (left axis), megatonnes Value (right axis), $bn 500 50 400 40 300 200 30 20 100 10 0 2000 - 01 2002 - 03 2004 - 05 2006 - 07 2008 - 09 2010 - 11f 2012 - 13z 2014 - 15z Source: Australian Bureau of Agriculture and Resources Chart 2: Port Hedland population, 1996–2025 40,000 35,000 30,000 ABS data Town of Port Hedland data 105% growth 25,000 20,000 48% growth 15,000 each year) will relocate from rural areas into urban regions (according to research from the global consultancy, McKinsey & Company) – the equivalent of the entire adult population of Australia each year. The essential building block of the cities that will house these people is, of course, steel, which provides the framework for apartments, office towers, ports and strengthening rods of all concrete structures. China has also brushed off the economic woes of 2008 and 2009 due to its unique status as the world’s largest holder of foreign exchange reserves (ie, US dollar holdings) – US$2.44trn in March 2010, according to China’s central bank, the People’s Bank of China. This has meant that China could ‘pay cash’ to counter the effects of the financial crisis in 2009 through the largest economic stimulus package in history – a very cool A$635bn. In doing so, China has vastly increased the number of its infrastructure (eg, roads and railways) and urbanisation 10,000 5,000 0 1996 2001 2006 2010 2015 2025 Source: Australian Bureau of Statistics, Town of Port Hedland Authority Chart 3: Port Hedland median value & annual growth Thousands $1,200 $1,000 $800 $600 $400 $200 0 1991 Median value 1992 1993 1994 1995 1996 1997 Source: Residex (data to year ending June 2010) Annual growth Commodities boom begins 1998 1999 18% 10-year annual growth average 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 % 40 35 30 25 20 15 10 5 0 www.yipmag.com.au 19
Hot spot | port hedland Chart 4: 10-year average annual house price growth 20.0% 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 18.0% 0.0% Port Hedland Source: RP Data, Residex Chart 5: Gross rental yields 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 10.0% Port Hedland Source: RP Data (as at June 2010) 12.2% 11.3% (eg, apartment complexes and schools) projects underway. With ANZ forecasting China’s growth to continue to remain at approximately 9% for the next 10 years, the future demand for Australian iron ore and other commodities is assured. The Port Hedland boom The property market of Port Hedland – comprised of the twin regions South Hedland (inland) and Port Hedland (coast) – has undergone an amazing boom. The town has long experienced sustained and strong capital growth (see Chart 3), with median house values rising from $66,000 to $184,000 over the 10 years to 2000. Over the following five years, values doubled to $361,000. The current average price for 9.9% 9.5% 6.6% Perth Brisbane National Melbourne Sydney 3.9% Perth – houses 4.2% 4.0% Perth – units National – houses 4.8% National – units Port Hedland and South Hedland sits at $740,000. While the median house prices have grown nationally at a 10- year average annual growth rate of 9.9% (12.2% and 11.3% for the commodities boom capitals of Perth and Brisbane respectively), this pales in comparison to returns investors have made by directly investing in Port Hedland. Specifically, median house values for Port Hedland have risen at double the national 10-year average annual growth rate – a stellar 18%. The reasons for this phenomenal boom in prices come down to the influx of thousands of very well-paid miners and the town’s severe land supply constraints, which have seen years of zero or near zero vacancy levels. Rental yields are a staggering 10% – easily the highest in Australia (see Chart 5) – and have been at these levels for many, many years as the town has struggled to cope with the influx of workers associated with the numerous iron ore projects in the Pilbara region. Consequently, at the start of the commodities boom, astute investors seeking the likely huge demand for iron ore by China snapped up four-bedroom homes in town for between $210,000 and $240,000 in 2002 and 2003. Seven years later, these homes now fetch between $950,000 and $1.2m, with rents of $1,200 per week for a $600,000 property in South Hedland and $2,000 per week for $950,000 homes in Port Hedland. Mines and land supply constraints Port Hedland had been a remote outpost on Australia’s north-west coast, 1,700km from Perth. This has all changed in the last 10 years. The expansion and opening of over 20 mines in the Pilbara region have dramatically altered the town’s property market, which is essentially land-locked by expansive flood plains. The sudden transformation of Port Hedland into Australia’s largest exporting port by tonnage, and resultant large wage increases combined with the town’s unique land supply constraints, have made a perfect recipe for its property boom. Further, the dramatic rise in ‘fly in/ fly out’ (FIFO) workers from Perth and interstate into Port Hedland means FIFO workers now account for some 2,000 (11%) of the town’s population. As Australia enters the second leg of the commodities boom, these powerful forces will continue to exert strong upwards pressure on Port Hedland’s rents and property prices. Miners and their $100,000 salaries The mining boom has rapidly boosted the town’s average salary for workers, which has risen 39% within seven years from $43,000 to $60,000 in 2007 – the latest data available from the Australian Bureau of Statistics – and has most likely continued to rise over the last two years. This rapid rise is due to the fact that virtually every worker employed by BHP Billiton and Fortescue Metals Group (which export iron ore out of 20 www.yipmag.com.au
Page 1: Hot spot | port hedland Port Hedlan
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Page 9 and 10: Hot spot | port hedland Map 2: Pilb
Page 11: Hot spot | port hedland Case study

Port Hedland Australia's iron ore boom town - Aussiehome

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