Karratha is growing but it may just be for seasoned investors
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Nov 27, 2019
Karratha is growing but it may just be for seasoned investors
With property prices rising 45 per cent in Karratha, it is time to revisit the mining town, according to Louis Christopher.
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Deposit photosKarratha in Western Australia is all about iron ore mining.
SQM Research's Louis Christopher has set his research sites on Karratha, a city in the Pilbara region of Western Australian.
Karratha adjoins the port of Dampier and is all about iron ore.
"(The town provides) a front line labour force for large mining companies such as Rio Tinto, who mine iron ore in the area and ship it out via the nearby ports," said Mr Christopher.
"In the last mining boom, towns like Karratha exploded in wealth but then, squandered it.
"Housing prices leapt three-fold to peak in January 2012 at $870,000 (median) then crashed to the point where prices finally bottomed out at 299,000 (July 2017). "
Mr Christopher said there is now a turnaround happening, similar to the previous mining boom.
Source: SQM Research
"The market is rallying hard. Prices have risen 45% in just three years," said Mr Christopher.
"And now the town has the no vacancy sign on as well. Just like back in the last boom where the local caravan park was charging $2,400 a week to stay. "
However, Mr Christopher said the future is not mapped out in concrete and the success of Karratha depends on the commodites market and the price of and demand for iron ore.
"I do know the RBA is forecasting a recovery in mining investment and indeed contracts have been awarded of late where the town is going to directly benefit," said Mr Christopher.
"So there is every chance the rally could keep going."
While this may look rosy for property investors Mr Christopher is cautious.
"Few of the banks would currently lend against such volatility. For there is just too much risk," said Mr Christopher.
"Perhaps there is an opportunity for a seasoned investor that already has a diversified investment portfolio.
"Always remember when it comes to higher risk opportunities, only invest with what you are prepared to lose."
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