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.


Don’t be fooled: mining towns can make great investments

I feel quite strongly that mining towns get an unfair rap in the media at times – people make flippant comments with irresponsible disregard of evidence.

During commodity price downturns like now, the uneducated often throw out the old “mining towns are bad investments” line. However, the evidence suggests that over the longer term some Queensland mining towns have performed significantly better than Brisbane.

While the property market of Queensland’s capital city is currently performing strongly, falling commodity prices have been the primary cause of property markets in traditional mining towns experiencing double-digit declines in value. The biggest pain has been felt in the central Queensland shire of Isaac, which consists of Moranbah and Dysart.

A typical house was worth $580,000 in December 2012 and has since declined in value to $237,500 over the two years (a decline of 36 per cent per annum). At the peak of the market in 2012, houses were rented for $1,350 per week. Today that same property would be rented for $320 per week.

Emerald median values have declined by an average of 15.3 per cent per annum over the last two years. Rental vacancy rates in Emerald are currently over eight per cent so rents have fallen from $700 per week (2012) to $270 per week.

The regional hub of Mackay provides a majority of goods and services to the coal face. In addition to a 33 per cent reduction in coal prices over the last two years, Mackay has built more properties than demand required. Median property values have declined by an average of three per cent per annum over the last two years. Rents have fallen from $500 per week to $380 per week.

In the far north west of the state, Mount Isa median values have remained unchanged. Mount Isa has a diverse range of minerals which it mines, whereas central Queensland is predominantly coal. Meanwhile, Brisbane median property values have increased by an average of 6.6 per cent per annum over the last two years.

In spite of Queensland’s recent mining town doldrums, the fact of the matter is that these markets have significantly outperformed Brisbane over the long term. Astute investors would be aware that property is a long-term asset class.

Over the 14 years since the turn of the century, which includes the recent downturn, Moranbah’s median property value has grown by an average of 14.8 per cent per annum compared to Brisbane’s 7.8 per cent. Emerald (10.9 per cent per annum), Mount Isa (8.5 per cent) and Mackay (8.5 per cent) have also performed better than the state’s capital city.

It wasn’t that long ago when the likes of Brisbane, Gold Coast and Sunshine Coast were having downturns of their own and the mining towns were setting record highs.

Investing in these locations is not for the faint-hearted. Timing is significantly more important when investing in locations where specific industries have such a significant impact on demand for housing. Often, the smart decision is to do the opposite to what the masses are doing. In the words of the world’s most famous investor, Warren Buffet: “The time to be fearful is when everyone else is greedy. The time to be greedy is when everyone else is fearful.”

A sophisticated property investor who purchased in Moranbah in late 2004 would have paid $150,000 for a three-bedroom house. Even with the recent downturn, the current value of $237,500 still represents 4.7 per cent average annual growth over the last 10 years, which is only slightly below Brisbane’s 5.0 per cent.

An investor who did purchase in Moranbah in 2004 and sold at the market peak of $580,000 in late 2012 would have made a massive 18.4 per cent average annual growth over those eight years. That’s roughly three times better than what anyone could have achieved in any capital city. Let me spell it out for you. A $15,000 deposit (10 per cent) paid on a Moranbah property in 2004 would have become $430,000 equity over eight years. Extraordinary!

On sheer numbers alone, one could argue a very good case that now is a good time to buy in Moranbah. An investor could pick the best property of the litter with no real competition, pay only $240,000, and rent it out for $320 per week. That 7.2 per cent rental yield is far superior to anything that any capital will offer.

Propertyology’s research suggests that an upswing in coal-related locations is on the horizon. Lower labour costs and the lower Australian dollar have improved the viability for mining giants such as BHP and Rio Tinto.

There are multiple new mining projects in the approval pipeline throughout Queensland and the Hunter Valley. The untapped Galilee Basin is the biggest coal province in the world. Propertyology’s research has calculated five large mines with combined project values of $53 billion having potential for up to 31,500 new jobs if they all proceed. Emerald, Mackay and Brisbane will be the biggest beneficiaries.

By Simon Pressley


Local workers leave home towns to become employed by mines

OUR regions are having the life sucked out of them and it needs to stop.

In the past two years, jobs have disappeared from the resources industry and our regional towns are growing desperate.

In the face of these shrinking prospects, the State Government has allowed workers from Brisbane and Cairns to take all 1000 jobs at two major coal mines in Central Queensland.

The Daily Mercury intends to do something about it and needs your help to get things changed.

The residents of nearby towns, including Moranbah and Dysart, were told not to bother applying to work at the Daunia and Caval Ridge mines.

By refusing opportunities to these communities, local workers have no choice but to leave their home towns if they want work.

Deputy Premier Jeff Seeney supports the use of a 100% fly-in, fly-out workforce.

He praised its benefits when recruiting by BHP Billiton Mitsubishi Alliance began early last year.

The FIFO precedent was set in Moranbah, but as regional mayor Anne Baker said: “Everyone should be watching”.

If it becomes standard practice, it could cause the outsourcing of thousands of jobs from gas fields surrounding Toowoomba and the Surat Basin.

If untold billions are spent building proposed mines in the Galilee Basin west of Gladstone and Rockhampton – and expanding Abbot Point coal terminal near Bowen – we don’t want 100% of the wages being flown back to Brisbane.

Our corner stores, bakeries, car dealers and supermarkets would struggle while the cities prosper.

Some workers may need to be sourced from out of town or overseas, but it should never be all of them.

The fight against 100% fly-in, fly-out workers has already begun in Moranbah with Mayor Baker, but it cannot be fought alone.

Mr Seeney said the use of FIFO is decided by Co-ordinator-General Barry Broe, not politicians.

That may be so, but politicians in power can make laws and policy to ensure our people are given an opportunity to work.

The Daily Mercury is calling on the government to change its stance on the 100% fly in, fly out plans, ensuring our regions have a chance to grow as communities, not just as holes in the ground.

In coming days and weeks we are going to highlight these issues to you. If you have a view on this, or a story idea on this issue, tell us about it.

BMA to slash 230 jobs from Saraji mine in Dysart, central Queensland

ANOTHER 230 jobs from the mining industry will be sacrificed after BHP Billiton subsidiary BMA said it would slash its workforce at the Saraji mine in Dysart, central Queensland.

It adds to about 8000 jobs that have gone from the industry in Queensland in the past two years.

The company said the jobs had to go to ensure competitiveness and the mine’s viability.

BHP Billiton has also been producing record amounts of coal from central Queensland in an attempt to drive down costs.

Just last month analysts were cheering the world’s biggest mining company for “smashing it out of the park” with coal production up 10 per cent. It also claimed it would able to deliver better returns for its shareholders.

But costs have crippled mining companies after many went on a spending spree during the boom.

BMA said an efficiency review found it had too many workers at Saraji.

“There will be approximately 230 employee and contractor roles impacted. Further consultation will occur with employees at the mine to determine how reductions will be achieved,” the company said.

BMA Asset President Lucas Dow said he understood that uncertainty caused by the consultations would be difficult for employees, contractors, their families and the community of Dysart.

Mining town vacancy rates mean that it’s wise to wait and watch

The publication this week by SQM Research of vacancy rate trends in mining-related cities and towns is a timely reminder to investors to check out supply-demand issues before buying.

The figures show that, in many important regional locations around Australia, oversupply is the issue, rather than the much touted “chronic housing shortage crisis” – just as it is for inner city unit markets in several capital cities.

Many investors consider demand factors, such as population growth, but forget to check out the level of supply in the market.

It’s difficult to imagine a place with more compelling demand factors than Gladstone, with massive levels of infrastructure development under way. Yet the Central Queensland city has a vacancy rate of 11%, according to Louis Christopher’s figures. Developers seeking to profit from the LNG boom went overboard and the Gladstone market has been sinking for the past 12-18 months.

Nearby Mackay has also suffered from an upsurge in new developer product and now has a vacancy rate around 7%.

Some markets have had a double whammy, with an increase in supply coinciding with a drop in demand. There is particularly true of Queensland coal mining towns, such as Dysart, Moranbah, Blackwater, Clermont and Capella.

Moranbah once ranked as the growth star of Australian real estate. In early 2012, its long-term capital growth rate (average annual growth in its median house price over the previous 10 years) was above 33% and its median weekly rent was $1,200. Before the end of 2012 its median house price would reach $750,000 – but, by then, rents were already falling and prices were soon to follow.

The demise of the Moranbah market was as spectacular as its rise. In the past 12 months its median price has dropped 42% to $435,000 and the median rent is now $520 per week. Median yields, which were 12% not so long ago, are now around 5%.

All manner of woes hit Moranbah. BHP and its partners refused to pay the astronomical rents being asked by investor landlords. Existing projects were downsized and new projects were deferred or progressed with 100% fly-in, fly-out workforces. And new dwelling supply hit the market.

Similar events have happened in other mining-related markets across Australia. In Roxby Downs in South Australia, where many investors bought in anticipation of a $30 billion expansion of the Olympic Dam mine, the vacancy rate has risen to 10% in the wake of BHP’s decision to defer the project.

Investors need to be aware of these issues because marketing companies continue to pump out promotional material for new developer product at high prices in mining-related markets that are in sharp decline.

One I received this week was touting two-bedroom units in Port Hedland for $715,000, claiming they would rent for $1,400 per week, provide a 10.2% return and earn up to $22,000 per year in profit – thereby providing the “perfect investment opportunity” for first-time investors.

The promo failed to mention that Port Hedland’s vacancy rate is now above 6%, that prices have dropped by up to 10% in the past 12 months and typical yields are now around 7% (and falling).

Similar propaganda comes in every week for highly-priced new product in Karratha and Newman (where the median price dropped from $850,000 to $450,000 in six months).

This is life in mining-impacted property markets. Many of the locations I’ve mentioned will recover, once the resources sector has finished the current phase of cost-cutting.

One tactic commonly being used is to shut down a mining project, sack all staff – and then, perhaps six months later, re-hire at lower pay rates and re-start the mining project. One town impacted by that is Collinsville in Queensland where, according to SQM Research data, the vacancy rate is currently 36%.

Moranbah, Newman and others will recover as there are big projects in advanced stages of planning. But in the short-term they are dangerous places to buy. Even investors who are happy to have some risk in their portfolio would be wise to wait and watch until the current phase is done and dusted.

By Terry Ryder
Thursday, 30 January 2014

Terry Ryder is the founder of hotspotting.com.au.

Affordable units to house non-mine workers

BHP-Billiton Mitsubishi Alliance (BMA) says new affordable housing properties in central Queensland will be used to lure non-mining workers to the region.

The company, along with the Isaac Regional Council, has built 16 units in Moranbah and Dysart, south-west of Mackay, for low to medium income earners.

BMA asset president Steve Dumble says given the amount of projects his company has in central Queensland, it needs to ensure the local infrastructure can support the demand for large-scale mining.

“We’ve invested a significant amount of money – $100 million over the last two years in a range of community infrastructure,” he said.

“We’re investing on a number of fronts in spite of the tough economic circumstances at the moment because we have a lot at stake.

“We want to make these towns and central Queensland attractive places to work.”

He says the new units will be available for people not working in the mining industry.

“People who are needed to run day care, to perform emergency services functions, to work in the medical area,” he said.

“Those sort of critical functions that towns like Dysart and Moranbah can’t do without.”

Isaac Mayor Anne Baker says council will now look to secure more corporate funding for further housing developments.

“It’s a moving beast – affordable land and accommodation will always be high on our agenda,” she said.

“We’ll be actively seeking other industry partners to come on board with us and contribute.”

She says the council has made a significant contribution to the project.

“Council’s contribution with this housing project was the land, which is valued at $1.36 million and we also had a further investment of land and feed capital funding of $6.7 million,” she said.

“It’s been a large chunk of money and revenue from council that’s gone into the project but that has been coupled and assisted by BMA.”


Regional centres a less risky way to capitalise on mining boom: Countdown to regional centres webinar

Mining towns present the ultimate risk-return conundrum for property investors, as I wrote in my Property Observer column in August.

They’re so hard for property investors to resist. They have the highest capital growth rates in Australia, and they have the highest rental returns.

They also are the riskiest options for property investors. Mining towns are single-industry economies – sometimes single-employer economies – and are vulnerable to downturns in the lone industry.

Over the past 10 years a typical suburb in an Australian city has averaged capital growth around 10% a year (thought certainly not in the past two years). The best suburbs in cities like Brisbane, Melbourne and Perth have averaged 14% or 15% – which is pretty good, because at those growth rates values are doubling every five years.

But the best of the mining towns have capital growth averages double those growth rates. Both Moranbah and Dysart, coal-mining towns in Queensland, have recorded growth in their median house prices averaging more than 30% a year. So too has Newman, deep in the Pilbara region of Western Australia. The median price for Cloncurry in western Queensland rose 60% in the past 12 months.

But the lure of the mining towns doesn’t end there. They also offer the highest rental yields in the nation. Many of them have double-digit rental returns. With the current surge in resources projects, particularly in Western Australia and Queensland, some mining towns can provide initial returns above 15%.

But it’s never plain sailing with mining towns. They lack diversity, so their economic life is a roller coaster. Some also service the surrounding farming economy, but the high levels of prices and rents are based on demand created by the resources sector.

This makes these locations highly vulnerable to downturns in the mining economy. When the global financial crisis struck in 2008, global demand for Australian resources fell. Miners downsized and in some cases shut down mining operations.

In coal-dependent towns like Dysart and Moura in Queensland, residential vacancies rapidly rose from near-zero to double digits. Gladstone, which has had four years of strong growth in house prices, had a 10% decrease in prices in 2009.

The small WA communities of Ravensthorpe and Hopetoun were devastated when BHP Billiton shut down a $2 billion nickel mine that had been completed only months earlier – 1,800 people lost their jobs and property values fell. Hopetoun’s price performance since then has been a decline averaging 6% per year.

More recently, we have seen mining companies refusing to rent properties in Moranbah over concerns about the high levels of house rents and upheaval in nearby Dysart followed the closure of the Norwich Park mine. Neither of these events is terminal to the towns’ investment prospects, but they demonstrate how uncertain property ownership can be in mining towns.

Ultimately, an individual’s attitude to investing in mining towns, or not, depends on their objectives, risk profile and experience as an investor.

It’s important for investors to understand their goals and to have a strategy for achieving them (it’s surprising how many don’t). Equally important is understanding their attitude to risk. If they prioritise safety and low risk, mining towns are not for them.

For anyone starting out as an investor, mining towns are not a good option. They may provide big gains short term, but ultimately values may decrease sharply if a downturn occurs, such as the one that followed the onset of the GFC in 2008.

On the other hand, experienced investors with substantial property portfolios may be happy to accept those risks within the context of a portfolio that has assets in safer locations.

Generally, investors wishing to safely exploit the rise of the resources sector should look at buying in regional centres that benefit from the mining upturn but are not dependent on it.

Regional cities and towns such as Toowoomba and Mackay in Queensland, Geraldton in Western Australia, and Muswellbrook in New South Wales have diverse economies but also prosper when the mining sector is rising. These are safer options than mining towns.

Terry Ryder is the founder of hotspotting.com.au and can be followed on Twitter.

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.

Mine town property still stars

MINING towns still dominate property values with staggering growth of up to 4000 per cent within 10 years.

Queensland’s dusty mining towns of Dysart and Moranbah are among the nation’s top performers for growth in house prices, with medians rising a monster 3992 per cent and 1919 per cent between 2002 and 2012.

Ten years ago, savvy home buyers who bought a house in Dysart for the $11,119 median would now have a property worth $455,000, according to RP Data figures.

Similarly units in towns close to the mining action also recorded phenomenal growth, with Gladstone, Woree and Gladstone City topping the list.

In Gladstone City, the median unit price has jumped a whopping 490 per cent from $73,000 to $430,000.

Western Australia has also recorded stunning property growth in its resources regions. Median house prices have climbed 900 per cent in Baynton in the 10 years, 500 per cent in Port Hedland and 250 per cent in Dampier.

 The nation’s more salubrious digs have chalked up less impressive results. Vaucluse in Sydney, where the median house price is $3.3 million, recorded 55 per cent growth over the same period.

Despite Queensland’s stellar performance in mining regions, RP Data research director Tim Lawless told a real estate masterclass last week that the Brisbane market was underperforming but starting to head in the right direction.

“Transaction volumes remain well below average,” he said.

In other real estate news, property prices across the nation are proving a boon to renters wanting to own their own homes with it now cheaper to buy than lease in a record 388 suburbs across the country.

The RP Data Buy vs Rent report analyses the difference between monthly mortgage payments and monthly rental payments based on the median value of houses and units.

The data shows that there has been a 63 per cent increase in the number of suburbs where it is now cheaper to pay a mortgage than pay a landlord – only 238 suburbs fit the criteria back in August.

For renters wanting to take the plunge, it is great news. For those prepared to pay an extra $50 a month more than their current rents and take a variable home loan, the number of suburbs on offer jumps even further to 1419 suburbs.

Unsurprisingly, across the capital cities, it is typically apartment-style housing where it is more affordable to purchase than commit to the dead money or a rental due to lower property prices.

Queensland offers the majority of suburbs and towns with 147 locations where it is cheaper to buy than rent, although most are located in regional areas including Mackay, the Darling Downs, Gold Coast and Sunshine Coast. Brisbane accounts for 42 suburbs, most of which are located in Logan and Ipswich.

New South Wales has the second highest number of options with 88 suburbs across the state where a mortgage is cheaper than renting. Units in Enmore and Rushcutters Bay are among the surprises.

Mr Lawless said the combination of soft property prices and discounted mortgage rates had combined with high rents and low rental vacancies to cause many renters to make the switch.

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

“For many renters, now may be a good time to either re-enter the market or buy their first home.”

Victoria supported just 17 suburbs where it is now cheaper to buy than rent, although only three of these were close to the Melbourne CBD. The rest were in country towns including Mildura, Bendigo and around the Wimmera.

In South Australia and Western Australia, there were 48 and 44 suburbs and towns respectively, while in Tasmania and the Northern Territory there were 30 and 11.

Rental tenant complaints on the up as the mines go down

Reports have emerged mine contracting companies cut from Bowen Basin operations are leaving resource towns such as Moranbah and Dysart in droves, taking with them employees housed in rental properties.

THE global coal market downturn is believed to be contributing to an increase in the number of complaints lodged with the Rental Tenancy Authority.

Reports have emerged mine contracting companies cut from Bowen Basin operations are leaving resource towns such as Moranbah and Dysart in droves, taking with them employees housed in rental properties.

The RTA confirmed 50 disputes from the two mining towns were lodged with the government organisation in the past three months.

RTA chief executive Fergus Smith said the number of disputes was a “significant increase” on the same period last year.

“This largely involves mining accommodation,” Mr Smith said.

“The disputes are mostly about repairs and maintenance and bond disputes.”

There are more than 200 properties available for rent in Moranbah. A search of realestate.com.au found 217 properties available for rent, with prices steady at about $900 a week, a stark reduction from previous highs of about $3000 a week.

The RTA is a statutory authority that provides tenancy information, bond management, and investigation and education services. It also acts as an arbiter between landlords and tenants, and can provide dispute resolution between the parties.

The rental market squeeze is expected to ease further, following the State Government’s release of the second (and final) round of land-only lots at Moranbah.

The 29 land lots and 51 house and land packages were expected to further relieve pressure on the crippled property market.

Deputy Premier and Minister for State Development, Infrastructure and Planning Jeff Seeney said the Bushlark Grove estate would put 151 new homes in town.

“Moranbah has been subjected to severely limited housing options and very high housing prices and the accelerated release at Bushlark Grove is alleviating housing stress in the community,” Mr Seeney said.