Thursday, 21 August 2014

All entirely predictable, and entirely predictably stupid.

From the FT:

In a dusty industrial estate next to the world’s biggest iron ore port in Western Australia’s remote Pilbara region, business has never been so bad.

“The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” says Jo Woodward, owner of Jems, a ramshackle building with an eviction notice stuck to its padlocked gate...

Western Australia’s “Pilbara Cities” plan was launched in 2010, at the height of a boom driven by iron ore and the discovery of natural gas off the coast. Several billion dollars have been spent on hospitals, roads and housing to transform the dusty mining towns of about 15,000 people each into living spaces that attract families.

But fears are growing that the drop in mining construction and a recent slide in iron ore prices threaten the future of the flagship project...

“We are focusing our efforts on the type of ‘city-building’ amenities and services such as parks and cafés, which will ensure families want to come and live here,” says Kelly Howlett, mayor of Port Hedland.

“A population of 50,000 is a realistic target. About 1,000 people make Western Australia their home every week and they can’t all go to Perth,” she says.

But locals warn a cooling economy is putting this at risk. Rents have halved in Karratha, record numbers of properties are listed for sale in both towns and some new housing developments lie empty.


Ben Jamin' said...

@ mw

As you know, they would blame the Resource Profits Super Tax.

If it wasn't for da government taxing everything, these little towns would be thriving.

Mark Wadsworth said...


Pablo said...

Fwd. from a friend of a friend:
"No its not stupid.
Rents will get to a reasonable level then people will move back, as it's a
port city.
The comment about the price of iron ore is both stupid and irrelevant,
(especially since the price has dropped almost 15% more is being exported)
The construction phase is now completed (thanks Julia)
Now the production phase is starting, and along soon the maintenance phase.

Such stupid ppl."

Mark Wadsworth said...

P, does your friend live there? The article was of course a bit exaggerated but it seemed perfectly plausible to me.

Bayard said...

P, FWIW, I thought that "predictably stupid" was referring to “The rents got so high in the town that when the boom ended, businesses began to die off everywhere,” i.e. landlords preferring high rents and no tenants to low rents and tenants, a trait which is observable the world over and probably connected with borrowing money and property valuations.

Mark Wadsworth said...

B, no the whole thing was stupid from start to finish.

Chineses have stupid land price and construction boom
= value of iron ore goes up
= a mining boom which was clearly going to be short lived
= government pretends it will last forever and spends billions on infrastructure which will not be needed for long
= landlords demand too high rents
= rinse and repeat

and the underlying stupidity is that the government didn't collect the resource and land rents.

Bayard said...

I suppose it depends on why the government spent all that money. If it was some sort of resettlement project, then it will work a soon as land prices and rents drop to a reasonable level. If it was in response to a perceived demand for accommodation in the region (and lobbying by local landowners, natch), then yes, it was stupidity.

Pablo said...

My friend does, and I assume his friend does too. He responded: "I read their replies, seems some of them have a reasonable idea. Others are just politically motivated to making silly statements.
In all business, there is design and implementation, construction, production and then maintenance. In a port of course, there is continuous work for some too. Now in maintenance phase, rents to go down etc, so its cheaper to maintain the mines there and in Perth."

Mark Wadsworth said...

P, but do either of your friends wonder about the cycle of stupidity I mentioned above?

Pablo said...

Dunno. (Only my friend is my friend. The other geezer - the one that's commenting is his friend + unknown to me.)