Pilbara boom to bust for millionaire property brothers Ryan and Morgan Crawford

Pilbara boom to bust for property brothers

As guarantors for Niche Residential Pty Ltd, ANZ claimed the brothers took out a $560,000 loan in 2012, which was used to buy an $800,000 three-bedroom, one-bathroom property in South Hedland.

Landgate records show that property was sold in September last year for $79,000, with the bank allegedly collecting just $49,600 at settlement.

ANZ claimed in 2013, Morgan Crawford borrowed $920,000 for a $1.25 million three-bedroom, one-bathroom house, again in South Hedland, which sold for $205,000 last year.

 

A very valuable lesson...it will happen in Sydney and Melbourne for people who are over leveraged.......happens every cycle....

 

I can see areas in Sydney softening but I don't see prices going from $800,000 to 80k or from $1,250,000 to $205,000 like the examples in Pilbara, no way, no how. The supply and demand as well as other fundamentals are totally different in the Sydney/Melbourne markets to that of the Pilbara et al markets.

 

This will NEVER happen in Sydney or Melbourne. You cant compare WA to Sydney/Melb or even Brisbane.

WA was a ONE industry state which was Mining. That was the primary source of income for the majority of people and industry in WA.

No other state/city in the entire of Australia relies on a SINGLE industry. Each of the other cities can live and easily survive if a particular industry was in trouble. Other than Mining in WA there was no private sector really, no tourism, no government sectors really as well. There was nothing.

That was WA's biggest problem and still is.

 

Agreed definitely not going to fall by that much in percentage terms, hell Perth hasn't fallen by that percentage.

But I do think it's reasonable to expect losses are possible of a similar or greater magnitude.

e.g. Sydney has houses selling for >$6.5M in Strathfield.

 

Yes but Australian cities could easily go down 30% or more, has happened in hundreds of cities around the world. With rising rates this would push many over the edge.

 

Eastern states would still get pretty beat up by any downturn in residential real estate because it would hit Construction really hard. So many companies, industries and people levered to it at the moment.

 

Yes I agree there will be softening in some areas and some will get hit even harder than a softening, but nothing like the Pilbara.

 

Sure I can see some areas and particular markets going down 30%, though still not even close to the likes of the Pilbara in terms of percentages.

 

The report is about mining towns.

No one is comparing Port Headland to Sydney, Melbourne or even Perth.

Some mining towns in Queensland have suffered similar dramatic falls.
Marg

 

You appear either misinformed as to what comprises the WA economy or simply ignorant of the true state of things in the west.

I do not hear any bleating from private or government sources in the east about the income they derive from mining western Australian resources.

 

As others noted, these are mining towns, much more dependent on one industry. Perth hasnt fallen by the same percentage.

 

In any investment field, share or properties there will always be the gambler, the wise, the reckless and the conservative.

Most successful investors survive all cycles with good risk and capital management
those who claim to fame due to high leverage and during a booming market I wouldn't consider them to be a good investor, they have plenty of luck on their side but luck can turn but prudent risk and capital management last forever.

I have seen it many times before, high leverage is double-edged sword, on the way up it magnified your gain but on the way down it can wipe you out with nothing left.

Always the famous last word, it never happens here, we are different, it an orderly slowdown and no such thing as a crash or sharp correction in Australia.

The trouble is it all cheap talk and self-assurance to make them feel safe but no one knows until
the crunch time comes and how it play out.

If History is a guide, boom and bust is inevitable how it start and end is never the same

 

Also a @charttv post from 2016

Crawford Property Group in liquidation

Crawford Realty still seem to be operating though?

 

This sort of attitude is to be honest (and I'm not trying to sound critical) not a great one. Multiple world cities have experienced massive bubbles. There is absolutely zero reason why a large collapse couldn't happen in Sydney or Melbourne or Brisbane because industry is only one of many, many factors that matter. The problem in the Pilbara was too many investors and too many houses as demand contracted, exacerbated as investors left the market. If we've overbuilt in Sydney and demand is reducing, we could easily see this problem on a similar scale. If prices in Sydney can grow at 20% a year they can sure as hell backtrack at a similar rate.

Population growth rates have reduced sharply in Australia over a decade, and if we go into recession history tells us immigration will basically crawl to a halt, as people don't move to countries where they can't get a job. We've also got quite low birth rates and an aging population. Demographically, we're seeing a stark shift in demand that is only going to get worse in the near term. Our biggest investment group for example are Boomers but that age group is retiring so their demand for investments is starting to unwind. Lending is also tightening right now which means the lack of credit is going to reduce the number of people accessing funds for investing and buying. All of these factors are causing demand to drop like a rock.

We've also seriously overbuilt in most major cities, especially in apartments and into city fringe areas. I personally think when the bubble bursts these areas will make up 90% of the falls we'll see, but that will still be very significant, and may still cause a lot of (mostly new) investors to see losses. You don't have to have a lack of diverse industry to burst a bubble, and diverse cities like LA, Dublin, Tokyo, Barcelona, Miami etc (all experiencing 50% falls or more) over the years have pretty firmly proven that. Bubbles happen when too many recent, inexperienced investors try to jump on a bandwagon they don't understand. Part of being a good investor is appreciating that bubbles absolutely do happen in financial markets, understanding why they form and never underestimating the scale on which they can mess a market up.

I don't know if we're on the brink of a crash but I do know there's a lot of risk in big cities in certain market sectors right now. At the very least people should be avoiding city fringe suburbia and new apartment developments right now, due to the growing risk of developer discounting. You do not want to be caught up in the tide of panic sellers (the same new, inexperienced investors who panic bought in the last few years, usually into poorly chosen assets).

Country towns started falling in Ireland a good while before Dublin. Big cities can be the last man standing in a bubble but that doesn't mean they'll be shielded. It's vital tonote too that in Dublin, I'd say at least 80-90% of the total 50% market loss occurred in new development areas, and many of those assets just never recovered (good family homes often lost out in the panic sell, but recovered quickly. Choose your assets wisely folks, and have a bubble plan. If you are holding something right now have a look at the sort of competition you have in your suburb and nearby suburbs. If listings already vastly outweigh recent sales, you might have a demand problem. This is especially problematic if a lot of your competition is held by developers or very recent buyers. If your suburb/asset type is tightly held, and your area made up of mostly owners preferably well ahead on mortgages you're probably ok, though obviously it's very individual).

 

At the end of the day everyone knows the reliance that WA had on the mining industry. No ifs and no buts - especially the Pilbara region. If you are denying that then you are naive at the least.

No doubt is it "possible" for a crash in Syd/Melb - but I would almost be 99% confident it will not be as bad as it was for WA. There is just way too much economic stimulus here, private and public sectors, tourism, government back initiatives and a plethora of others including immigation and its attractiveness from O/S investors like Asia.

There is not going to be a scenario of $1 million dollar house in Sydney crashing to $250k. I actually wouldnt mind that if that did happen - I'd snap up every single house I could if this scenario ever came to fruition.

 

Ok fine, how do you explain the correction in Perth? You do realise it's a city of over a million people with a very diverse economy, right, dominated by services? Mining was less than 10% of WA's economy even at the peak of the boom. That's about how many people in NSW and Vic are employed in construction right now, more than triple as a percentage of GDP than what it was just 15 years ago. The end of that sort of massive construction boom will be no different to the end of the mining boom.

 

A lot of people say that but, when the **** hits the fan, most run to the exits like everyone else.

Over the last 40 years that I have been investing in property and shares, I have seen it many times.

It takes a lot of nerve to hold one's assets and even more nerve to buy more assists when people believe the 'end of the world is happening'.

 

I see this all the time...concentration in one market is at your own peril.

These guys thought they were bullet proof.....you still need to manage risk. I can see this happening in Sydney at some point also...people forget market cycles.....Port Hedland has a boom bust cycle...so does Perth and Sydney.

Melbourne and Adelaide are more steady eddy's though this cycle inner Melbourne has gone crazy.

Brisbane is somewhere in between the two types of markets.

Lots of young guys leveraged this cycle in Sydney..it should get interesting if the market in Sydney correct...people say it can't go down 30%...in some suburbs it will ........happened last cycle.

In the marines we call them ....young dumb and full c^m... .easiest group to command to take a hil. The younger ladies are much more meticulous and balanced in their approach..not all but some.

Ole sayin you can't out an old head on young shoulders....

 

A question for you Leo....were you around in 2004-2006 in Sydney?

I get that it won't reduce 80%....but 30% fall backs on poorly bought properties is not unusual. For example there is a $1.5m home in Campbelltown...if someone buys that in a normal market it would struggle to get even 950k.....that represents a 50% fall....

Same in places like the Pond ....a certain ethnic group is pushing prices to levels of ridiculous levels...someone who pays 1.1m...could end having a 800-900k house in a normal market. Medians will not be affected as typically the houses affected are well above medians.....