The Whyalla community desperately wants the steelworks to stay open in any restructuring of Arrium, with the real estate market already being hit hard. Credit:Whyalla News The Whyalla real estate market was already slowing markedly over the past year as Arrium cut almost 1000 jobs as it attempted to stave off more serious problems. But it collapsed anyway, with the company on April 7 being put in the hands of administrators, and there's now more downward pressure expected in property as the knock-on impact on confidence washes through. Elders Real Estate Whyalla residential specialist Graham Taylor said while there are about 600 houses on the market in a city of 22,000 people, some sellers are just testing the market out of caution. "There are a lot more houses on the market. It's certainly higher than normal," he said. "Vendors are needing to be realistic. They have to meet the market.."

The median price for houses in the six months ended December 31, 2015 fell by 10 per cent to $215,000, and the number of sales achieved dropped in 2015 to 111, compared with 252 in 2014, said Domain chief economist Andrew Wilson. There are other metrics that show it's a "weak market". Average discount rates are at a "very high" 17.3 per cent and the average days on market is 248 days. "Whyalla certainly reflects the potential volatility of regional centres that are exposed to single economic drivers," Dr Wilson said. Whyalla isn't the only example of housing markets being crunched as the mining boom is punctured. "Central Queensland regions of Mackay and Gladstone are classic examples of significant hangover after the party," he said.

Domain is owned by Fairfax Media, publisher of The Sydney Morning Herald, The Age and The Australian Financial Review. "Although growth in these areas was certainly driven by a local mining boom, it was exacerbated by high levels of speculative irrational residential investment activity," Dr Wilson said. House prices in Moranbah have fallen from $820,000 to $170,00 in some cases. Whyalla hasn't seen quite the same excess, although there was much optimism in 2010 and 2011 as BHP Billiton planned a $30 billion expansion of its Olympic Dam mine, 560 kilometres north of Adelaide. The company eventually scrapped the mega-expansion plan in August, 2012. Whyalla is about 300 kilometres by road from the Olympic Dam mine. Mr Taylor from Elders said prices did spike at that point and there was more interest from investors outside of the city. But the decision by BHP Billiton not to proceed with its expansion meant there hadn't been the huge price spikes as in Western Australia's resources boom. "There has been downward pressure for the past 12 to 18 months," he said.

Some long-term residents are eyeing opportunities to pick up bargains now because of the cheap prices, in anticipation that the steelworks would continue operating in the longer term. Investors in the big four banks are increasingly nervous about the exposure of ANZ, Commonwealth Bank, NAB and Westpac to the Australian residential housing market if there were a sustained house price drop across the market, which has been forecast by some experts in a situation eerily similar to the movie, The Big Short, based on the United States' sub-prime mortgage collapse in 2008.