House prices in many mining centres have had a tough run recently, especially when compared to the enormous gains seen inAustralia’s southeastern capitals over recent years.
They’ve been smashed, with the median value in some towns halved, and in some isolated cases, the declines have been even larger.
After home values shot up up alongside higher commodities prices and mining firms increasing capacity, it’s been nothing but one-way traffic substantially lower in many mining towns since.
Commodity prices subsided as increased supply hit the markets, and the workers who helped to boost capacity have, in many instances, already left so demand for housing fell sharply, and with it prices and rents.
However, while prices have been hammered, and in some instances are continuing to fall, there are signs that the current boom-bust cycle may be nearing its end.
According to new research from CoreLogic, market activity is starting to stir with sales volumes picking up and price declines beginning to slow.
This chart shows sales volumes on a rolling annual basis, along with median house price, for some well known mining centres in Australia.
We’ve broken it down into two segments for aesthetic purposes, starting with Gladstone, Mackay and Issac in Queensland.
And here’s the second half of the chart, looking at Port Hedland and Karratha in Western Australia and Roxby Downs in South Australia.
There’s are signs of life, although they remain well below the peaks seen in prior years.
“While this result is unlikely to represent demand substantial enough to drive prices higher, it may be enough to slow or stop the declines in prices in the short to longer term,” says Cameron Kusher, research analyst at CoreLogic.
“It’s also important to remember that it’s not as if there is no demand for housing in these towns, it’s just substantially lower than it was during the mining boom. Anyone looking to purchase now is securing a property at a substantial discount from previous highs however, these towns also continue to achieve some of the best rental returns based on current pricing and rents.”
While Kusher expects there’s little prospect for capital growth in these towns over the coming years, he says that investors seeking income may be becoming more attracted to these markets, which could explain the recent uptick in sales.
“Anyone looking to purchase now is securing a property at a substantial discount from previous highs,” he says. “These towns also continue to achieve some of the best rental returns based on current pricing and rents.”
It’s something that is unlikely to appeal to all potential investors given the potential risks, but it’s likely that some may say the same about buying into the Sydney and Melbourne markets after the recent run-up in prices.