Our financial planners and mortgage brokers work primarily in the Perth market, but we like to keep an eye on all opportunities that may be relevant to our clients. One opportunity that seems to be “hot” again after a year of pessimism is the Pilbara region.
With an uncertain economy, a contraction of the resource industry and a contentious election, investor confidence was shrinking for most of 2013. But things are finally starting to change for the better.
The elections are over and the resource sector seems to be regaining its confidence. While many still proclaim gloom and doom for iron ore in particular, iron ore prices have increased from $87 per tonne at the end of 2012 to current levels between $130-$140 per tonne. In addition, exports of iron ore through Port Hedland are reaching record levels.
The Current Situation
All in all, it would appear that the Pilbara region is alive and well beyond current expectations. The resource industry is planning a lot of major projects in the region that should further growth and keep property values on the rise. FMG is focusing on new projects and increasing export tonnage, BHP is planning on expanding the outer harbour, Rio Tinto is going over plans for expansion and the Roy Hill mine is in the developmental stage.
No matter whose side you are on, it can’t be denied that the results ended an environment of uncertainty for both sides. Confidence is up for investors, resulting in more movement and interest in purchasing investment properties. Renters are moving more, many looking to upgrade their accommodation while many are trying to lower their rent.
Investing in Pilbara: A Wise Strategy
There are currently many opportunities in the Pilbara region. Entry level investors will find their first properties very affordable. Those who already have investment portfolios in the area will have plenty of opportunities to expand those portfolios.
There will also be group opportunities, such as a recent one in which a developer is willing to split profits with the first investors in his development, leading to as much as $150,000 in equity in their homes as soon as they are completed.
As financial planners and mortgage brokers, we like Pilbara properties as a long-term investment strategy for Perth area investors. Entry level investment homes should be affordable and provide good returns in the long term. Experienced investors with a bit of capital to invest should be very happy with the potential to prosper.
For those who don’t want to go north, mining towns surrounding 14 mines within 200 km of the Perth area still has great long-term investment potential. There has never been a 10-year period where investors didn’t make money on real estate. We don’t expect the following 10 years to be the first period in which real estate investors don’t make money.
Holding properties for 30 years virtually guarantees a handsome profit. We like the model where a small investor gradually adds properties until they become a larger investor. It isn’t possible for everyone, but at the very least, if you buy a property in the North, you will always have a nice place for relocation, especially if you buy in a “sea change” town.
What the ABS Has to Say about the Mining Industry
For those who are still apprehensive about the mining market, the ABS September 2013 Mining and Petroleum Investment update should come as good news. While the mining industry has shed a few jobs, they have been investing record amounts in WA.
The resource industry invested $48 billion in private new capital expenditures in WA during the 2012-2013 year. That represented 51% of all new capital invested in Australia, which totalled $95 billion. New capital expenditure from all sources was $58 billion in WA, which was 36% of the total expenditures for Australia.
In addition, the numbers don’t actually account for all mining investments due to the use of The Australian and New Zealand Standard Industrial Classification. For example, refining and smelting of most minerals don’t count as mining according to the ANZSIC and aren’t included in the numbers from the ABS.
Your Personal Investment Plan
At Purely Finance, our financial planners will help you devise a personal investment plan. Whether you would like to invest in the Perth area, smaller towns east of Perth, or towns in the Mid West and Pilbara regions, we can help you make a plan and stick to it.
We have access to a lot of statistics, and we will help you perform your due diligence before you make any large investment, especially real estate.
Call (08) 9472 9766 today.