From $1.3m to $360k, the bust hits home

PROPERTY prices are in freefall in some parts of the country – and the locals appear to be happy about it. .

The Port Hedland house passed in at auction for $360,000.

THE fall in the price of iron ore has ended an era of astonishing rents in the Pilbara and opened the door to families and small business operators who were pushed out at the peak of the boom, according to local MP Brendon Grylls.

In one of the starkest signs yet that the resources boom is over, a house in the Pilbara mining town of Port Hedland was passed in at auction for $360,000 at the weekend after it was bought for $1.3 million just four years ago.

The fate of the modest 1960s fibro home on a 600sq m block mirrors the spectacular decline in property and rental values in Port Hedland, home to the world’s biggest bulk commodities port.

But Mr Grylls is among Pilbara residents who see a positive side to the cooling of what they describe as a once dangerously overheated local economy; they say that as the real estate market normalises, a sense of community is returning.

Mr Grylls, the former WA Nationals leader who campaigned for the seat of Pilbara on a promise to improve housing affordability in the region, says small business operators left the town of Karratha in droves at the height of the construction phase of the resources boom because they realised it was more profitable to rent their homes than try to make money from a business.

“If you were trying to run a fish and chip shop in the Pilbara and you know that you could be getting $2000 a week for your house, why would you try to make $2000 a week selling fish and chips with all the overheads? You wouldn’t. You’d just leave, sit back and collect the rent and that is what people did,” Mr Grylls said.

“The result was very sad for the town.”

Mr Grylls said the construction phase of the boom was never going to last forever.

“The town of Karratha is not dead it is more like an actual town with shops and families,” he said.

“Last week a frozen yoghurt shop opened, which is a very big deal when you know what it’s been like up here. The kids went crazy.”

Mr Grylls said he paid $1350 a week rent for a Karratha house that fetched $2400 a week in 2012.

“This normalising is not good for the Sydney investor who bought a place in the Pilbara sight unseen because their adviser told them it would be good for their negative-gearing portfolio,” he said. “But the market is surprisingly resilient, it’s not as if the bottom has completely fallen out.”

The median house price in Port Hedland has fallen about 23 per cent in the past two years, according to the Real Estate Institute of WA.

Big miners cut spending in the Pilbara as demand from China softened, leading to a 50 per cent plunge in the iron ore price over the past 12 months.