CQ property market is stabilising to pre-mining boom levels

THE property market throughout Central Queensland is stabilising with sales volumes and prices returning to pre-mining boom levels.

The boom triggered significant price rises in housing and apartments throughout the region, including out west to the mining towns of Moranbah, Emerald, Dysart and Blackwater.

The economies of these towns have struggled since the boom ended about 2012, with rising unemployment and limited opportunities for economic diversification.

However, for Mackay, Rockhampton and Gladstone, traditional economic bulwarks of tourism, sugar, beef, export and education are helping to stabilise the economy.

Many experienced property observers agree, property sales volumes and values are now finding their new normal.

Mackay has fared the worst of the three major centres, with the annual median sale price continuing to sink, now sitting at $365,000, down 10.1% on a year ago and 8.8% lower than five years ago.

Even though Rockhampton has a lower median house price, now sitting at $294,500, it’s only 5.4% below a year ago, and down just 1.8% on five years ago.

This indicates a more stable market and the REIQ is confident that the bottom has been reached.


The announcement that gave hope to property investors in mining towns

An announcement this week gave hope to all those investors who own properties in mining centres.

Indian mining company Adani started advertising the thousands of jobs that will come with its $16 billion Carmichael coal mine in Central Queensland.

It’s a further indication that Adani is keen to move ahead quickly with its project, which will include the mine, plus rail links and export port facilities.

Every day I receive emails from people who own investment properties in places like Moranbah, Emerald, Blackwater, Mudgee and the towns of the Hunter Valley.

These places have lots in common. They’re all towns where property markets boomed when coal mining was thriving, with rents and property values rising strongly. Then two things happened: the coal sector turned south just as developers were heading north. Demand fell just as supply was rising.

Big vacancies caused rents to fall and property values followed. If you bought in any of these places two years ago, you will be feeling lots of financial pain.

Moranbah’s median price has dropped 40% in the past 12 months and rents are about one-third of their peak levels.

The common dilemma expressed in so many of those emails is this: should I cut my losses and sell, or should I hold on and hope it improves? One correspondent this week suggested things might be turning around in Moranbah but asked: “Is it just wishful thinking?”

The Adani announcement that expressions of interest are open for jobs on its Carmichael mine suggests that hope is not unreasonable.

Adani, which has state and federal approvals for its Galilee Basin mine, is planning to employ up to 5,000 people during the construction phase and 4,000 more during the mine’s operation.

A key beneficiary will be Emerald, a regional centre which sits amid the Galilee Basin to the west and the Bowen Basin to the east. Lots of coal, lots of big plans, but not much action at present.

I’ve often said to people: it will only require one of the half dozen proposed mega projects in the Galilee Basin to go ahead, for Emerald’s market to come storming back. I’ve always thought the Carmichael mine was the most likely to go first, because Adani wants the coal to provide for its own needs (its Indian power stations) rather than to supply the depressed global market.

The problem for investors sitting on empty rental properties is that these huge projects are slow-moving events. You need lots of patience and nerves of steel.

But this is life in mining towns. It’s not a new phenomenon. This is not the first time Moranbah has fallen into a trough (althought this one is deeper than any of the previous). It’s not the first time a boom in Gladstone has been followed by a bust.

Gladstone’s market experienced a major peak in 2008, followed by a couple of years of declining values, before rising to another peak in 2012, followed the another period of decline.

Mudgee in New South Wales had a peak in 2007, falling prices in 2008 and 2009, another peak in 2010, decline in 2001, another peak in 2013 and now another decline. The price graph for Mudgee looks like a mountain range.

Ditto Muswellbrook: since 2006 it’s been minor peak, minor trough, minor peak, mknor trough, major peak (2012), major trough (now).

When prices rise strongly in markets like this, the market always “give some back” before moving into the next up-cycle. Usually the market gives back less than it gained earlier, so the overall trend is upwards.

If you don’t have the temperament to deal with this kind of volatility, it’s best to stay out of resources-related markets.



Buying can be cheaper than renting in mining towns

DESPITE an overall downturn in property prices, Moranbah and Dysart remain two of the top five suburbs in regional Queensland where buying a house is cheaper than renting.

Moranbah topped the list, followed by Blackwater in Fitzroy, Dysart, Miles on the Darling Downs and Kunda Park on the Sunshine Coast.

In August, the Daily Mercury reported that the median weekly rent for a house in Moranbah was $1900.

That price has since dropped to $1500, according to a report by RP Data.

The median weekly rent for a house in Dysart was $1400 in August and this price has also fallen – to $980.

In Australia, Queensland has the highest number of suburbs and towns where it’s cheaper to buy than rent – greater Brisbane accounts for 42 suburbs while the remaining 105 can be found in the regional areas of the state.

Based on principal and interest payments on a variable mortgage rate, the difference between buying and renting a house in Moranbah could save you $2859 a month, and $1253 in Dysart.

But they weren’t the only suburbs in the region where buying could be cheaper than renting.

Buying a unit at the Mackay Harbour could save you $565 a month compared to renting, while buying a unit in Blacks Beach could save you $413.

You could also save $309 on a house in Ooralea and $298 on a unit in East Mackay. Buying a house at Bakers Creek could save you $280 and buying a unit in Eimeo could save you $166.

According to RP Data national research director Tim Lawless, the Australian housing market experienced one of its toughest years during 2011 and the early months of 2012.

“In some suburbs it (buying) may actually be cheaper than renting, especially where we are seeing evidence of tight rental markets resulting in rental increases and lower home values,” Mr Lawless said.

Will Blackwater suffer Moranbah’s fate?

As you probably saw on Monday night, Moranbah is in the grip of the mining boom and feeling the strain very much with a lack of services, and a permanent population that feels squeezed out of their own town.

Is Blackwater heading down the same path though? That’s the fear of many in the area with thousands living in mining accommodation at the moment in town and plans for thousands of more rooms in the planning stages.

Peter Maguire is the Mayor of the Central Highlands Regional Council and I put that question to him – is Blackwater the next Moranbah.

Audio at: http://blogs.abc.net.au/queensland/2012/05/will-blackwater-suffer-moranbahs-fate.html