Port Hedland Australia's iron ore boom town - Aussiehome

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