The signs are looking better now out of China and with the share prices from BHP and RIO lifting substantially today, I think we are all optimistic about the potential economic stabilization currently forecast and intern increased spending by the miners in the Australian market. Great outcome for those central QLD mining areas re jobs, housing market etc!
Aviator77 wrote:The signs are looking better now out of China and with the share prices from BHP and RIO lifting substantially today, I think we are all optimistic about the potential economic stabilization currently forecast and intern increased spending by the miners in the Australian market. Great outcome for those central QLD mining areas re jobs, housing market etc!Really….
How about those 400 jobs at Ensham?
Also found this link illustrating approvals within the Alpha region. This is the information that effects the short and long term viability of Emerald QLD as a place to invest. They cant house everyone required for these mines around Alpha within the campsites. Emerald will have at least 15% of these forecast workers living within the city for the next 33 years minimum.
http://news.ninemsn.com.au/national/2012/10/17/17/22/eis-released-for-qld-coal-project
Aviator77 wrote:Also found this link illustrating approvals within the Alpha region. This is the information that effects the short and long term viability of Emerald QLD as a place to invest. They cant house everyone required for these mines around Alpha within the campsites. Emerald will have at least 15% of these forecast workers living within the city for the next 33 years minimum.http://news.ninemsn.com.au/national/2012/10/17/17/22/eis-released-for-qld-coal-project
Hi Aviator77
Are you in the Emerald market?
Hi Josh,
Congratulations on your involvement in an article in the November 2012 edition of 'Your Investment Property' magazine. Well done the article was a great read.
In the scenario you take a 20 something investor and recommend purchasing a 2/1/1 OTP unit in Emerald, Queensland, as part of a long term strategy to make $1 million dollars. Subsequent purchases include a 4/2/2 in Mackay and then back to Emerald purchasing a 4/2/2.
In the example, and for the purchase of the first property, you use the strategy of a fully furnished unit in Emerald to attract a consistent rental of $675 a week.
Could you expand on your thoughts on the dynamics of the rental market in Emerald because at the present time my thoughts are that the rental market in Emerald has softened considerably. I would assume that in this current environment finding a tenant for a fully furnished product may be challenging. As I'm sure you are aware Gregory has closed and Ensham has reduced personal which has had an impact on the Emerald rental market. The vacancy rate has risen which has caused me to be very conservative with my rents to maintain a tenant. A number of PM's have also expressed the same.
Plainly you are in the business of marketing property in Emerald and Mackay, which you declare upfront, however I'd be very interested to hear your thoughts on the current situation in Emerald and where you think the market is headed from here?
Once again congratulations on the article.
Jack
Hi Jack,
You bring up a good question as many people would look at my strategy in a negative way due to the action that has happened in Emerald lately.
Firstly, the article was written many months prior to release so the market had not changed so much. However, I was asked to produce a long term strategy. For me personally, whether someone believes it to be right or wrong, Emerald is a part of my personal long term strategy. This is why I would suggest it to other people if it suits their portfolio. Which leads to your next point, yes, we supply properties in Emerald to our clients, one of which is yourself as you know. However, i do want to point out that we can broker deals anywhere we wanted, and we chose to deal in Emerald as one place strategically.
Emerald is a place where the market fluctuates for periods of time, sometimes good and sometimes not so good. Some facts to consider are:
– Emerald has a population of 17,000 approximately
– Emerald has approx 50% owner occupiers
– Emerald is a contracting and service hub for the Bowen Basin.
Emeralds future prosperity is closely linked to the coal mining industry, theres no doubting that in my mind. However the fundamentals to Australias potential future coal mining industry are strong. What is wrong about it from my perspective at the moment is the following 4 points.
1. The Australian Dollar is too high. Partly due to the exponential capital being invested at the moment.
2. The unions are struggling to get along with the corporations. Disputes that have been going on for two years now have gone too far for my belief. Im not going to get into a debate about what is right or wrong. However my point of view is that it is no ones right to have a job. Therefor, our jobs and industries are not fail proof. We are putting to much pressure on the business environment in this country.
3. Two new taxes have been introduced, a) MRRT b) carbon tax. It always takes time for people and industries to see how this will, in reality, affect them. Leading up to an election, the large corporations with so much at risk always attempt to have their political sway buy afecting the enviroments and aiming to have people vote for a party which the industries believe will benefit them long into thw future.
4. The cost base of our mining industries are exponential. In fact, just last week BHP made an announcement that it was time to be more conservative with their operating expenditure. When commodity prices go sky high, the miners will do whatever it takes to get the stuff out of the ground as quickly as possible. most of the time, oblivious to costs.
this is summed up in a statement from BHP.
"While our resource base in Queensland is very high quality, the heavy cost of taxes, royalties, declining productivity and a strong Australian dollar means that further investment to grow these operations is much less likely," BHP CEO Marius Kloppers said in notes for a speech in Brisbane.
When all of the 4 factors sort themselves out to some extent, we will be back on track. times like these have happened before, and they will resolve themselves, and most likely happen again.
Back to Emerald. It will also be the hub for many future projects, which will, at some point, go ahead. I would recommend for everyone to due a lot of due diligence into the mine closures at present as there is a lot to be understood about them.
As investors follow each other, i believe we will not see many new properties being built from July next year. This will, as it has in the past, provide time for the market to soak up an increase in rental properties which have been bought, usually at inflated prices, to investors who jump on board with the hype without understanding the market fundamentals or even its short, medium and long term outlook. This will see rents increase when, inevitably, there is limited supply and high demand, and investors will, once again, push the market even higher than the average.
Finally, my risk mitigation strategy for my client profile in YIP was that they need to have a property, which, at the least, pays for itself. I believe that Emerald will provide this to investors assuming you don't pay too much for your property.
I hope this clarifies my point of view and understanding.
Cheers
Yes JT7 in amongst other investments. Still pretty happy with it also but like my privacy, ha ha.
Hi Josh,
This is an excellent read, very informative & honest. I will continue to follow your blog.
Will you be doing another trip?
Cheers
Aviator77 wrote:Yes JT7 in amongst other investments. Still pretty happy with it also but like my privacy, ha ha.lol………
Yes, pseudonyms' are useful aren't they……….
Hi Josh,
i agree with you in regards people to understand the strategy they are selecting& work there way backwards in what they can afford, work out what the medium price in that area & what is realistic return on the property( always include worst case in regards to 48-50 weeks tenanted )
always due diligence on all aspects of we're the general work is coming from for stability, & what is the key economic drivers of the area.
Talk to locals,real estate agents , shop owners for best & worst areas to purchases as the more you leave to chance, the more chance of failure.
Regards
left
Hi,
As we invest all throughout regional Qld, we are always traveling around!
Cheers
Thanks Josh,
Always interesting to hear your perspective and I appreciate the answer to my questions.
You make four valid points that certainly contribute to the environment in the Bowen Basin at present.
I'd add that there is also a lot of uncertainty in the market place. People are fearful of the outcome in Europe and also the States although there are some encouraging signs coming out of America. The media are certainly leveraging off the pessimism and I have no doubt this plays a significant role in confidence.
The fall in commodity prices into the second and third quarter also contribute to the situation. There is an argument that China has now hit the bottom registering 7.4% growth this quarter and now will strengthen which may see Iron ore and Coal both thermal and coking rise off the back of higher demand. There is also of course a leadership change in China and we may not know the true effects of any increased productivity in China until well into the first quarter of 2013.
However, on a slightly different note there is some encouraging signs coming out of the Galilee Basin.
Thankfully it looks Bhp and the unions have finally sorted things out so that's one issue out of the way.
Hi Jack
I searched Queensland newspapers for more detail on the agreement between BMA and the CFMEU. Not much publicity yet, expect there will be more tomorrow. I found an article in the Mackay Daily Mercury, link below. It seems as though BMA caved in on the contentious issue regarding their previous insistence that their own employees should be appointed to carry out safety inspections, as opposed to the current system where the CFMEU can call stop work based on their own inspections. I recall from previous reading that there is a current court case underway with BMA suing the union and some individuals over claims that a previous stop work was declared needlessly, which affected all BMA mines and resulted in the loss of several million dollars production. This article mentions that safety check inspectors are covered by the agreement, so perhaps they worked out a rational compromise. Apparently there is a "housing agreement for those working in nearby towns". Also, apparently, the employees are to receive a 33.33% increase in superannuation. Who wouldn't appreciate that? It's good to see that there is a resolution, one less element of uncertainty in the equation. That helps with point number two in Josh's summary of negatives affecting the coal mining industry. If only we could do better with point number three, which should , by the way, include Queensland's increased royalties.
http://www.dailymercury.com.au/news/3000-workers-vote-yes-bhp-alliance-deal/1591643/
Maybe things will pick up in Moranbah if a few Coal Seam Gas Projects eventuate.
Hi fingerscrossed
It's unusual for the Chinese government to show so much concern for the loss of a few coal miner's lives. The article doesn't mention how much coal those "small" mines produce, or the percentage of the country's total production, but it seems unlikely that they would close mines that have production significant enough to impact on international prices.
Hi there, what are your thoughts on "Clermont" for people wanting to purchase new townhouses????
Here's a news article about a proposal for India's Coal Ministry to monitor coal acquisitions quarterly over concerns that the supply demand gap is widening partly as a result of slow progress developing foreign acquisitions. The article mentions an expectation that India will need to import 185-200 million tons of coal by 2017 (current international trade in coal reportedly estimated at one billion tons p/y) to meet rising demand from the power generation sector. This tonnage would therefore represent appx. 20% of current international coal trade. Does anyone know off hand how much thermal coal India currently imports?
And here a current summary of the major coal mine projects currently underway in Qld.
http://www.dailymercury.com.au/news/no-holding-big-miners-back/1601418/
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