All Topics / Help Needed! / QLD mining regions (Bowen & Surat Basins & Gladstone): Willing to help anyone with questions

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  • Profile photo of HengistHengist
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    We have been unnoccupied in Dysart since Mid feb.

    Agent a little vague, but seemed to think it was strike related.

    Also said it was a little strange as feb is usually gangbusters.

    Any update from a local would be valuable.

    Profile photo of gloveboxinvestorgloveboxinvestor
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    So after reading the 13 pages of comments & thoughts in relation to these central QLD areas, it appears that many are very bullish about the region. & rightly so given the areas performance over the last few years! But the recent numbers relating to our trade deficit should be ringing some alarm bells with many of you I would have thought. I’m sure that what i’m about to mention has all been included as part of your DD anyway….

    Please allow me to put on my little bear hat for a moment, so I can offer a few thoughts.

    With Iron Ore & coal pricing coming off their peaks, a softening in china, a global downturn, skyrocketing $AUD, & environmental concern may all act simultaneously to cool this current boom. This is alongside local manufacturing & construction slumps, a tightening finance sector, national softening in housing, teetering unemployment, lacklustre government direction will no doubt continue to stifle business development & economic growth moving forward. It appears we have a resources sector providing most of the strength in the balance BUT when & how will this current boom bust?

    As a result, tourism & retail have their pants well around their ankles & all the government seem to be doing at the moment is whinge about one other…nothing new there really.

    There appears to be growing concern that may affect the mega bucks pouring in to these proposed projects also, & that is the momentum of an environmental campaign. For a moment, imagine the government imposing a moratorium on all port expansion due to the negative impacts on the reef. Abbott point expansion for example, has now had the decision for its expansion pushed back to late this year, for those that missed this snippet of news in the fin today.

    All these bearish indicators alone may not significantly impact of the current operations as a whole, but project all of these impacts further down the track, at what point do mining companies / China / India / Japan flick off the switch? Trading partner coal caps? How many of those $billions of proposed mines will actually get up if port expansions don’t get a go ahead? What happens when resource trade deficits impact so heavily on GDP & coal / Iron ore operations actually contract? I know it’s bearish & there will be many argue that thermal coal will see us through, but Australia certainly is not the only continent with deposits. It’s turning into a very expensive one though…

    My bear hat is off now. in case you were wondering.

    Profile photo of ChrisA1ChrisA1
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    Interesting comments Gloveboxinvestor and your comments provide a sanity check.

    Any further comments from Portfolio PI?? You appear to have gone underground recently??

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of CMSCMS
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    We settled on a property in Moranbah 5 weeks ago – untenanted ever since. The real estate agents say "nothing is moving" and have lost interest in returning calls or giving advice on dropping rent. They seem to think things will recover, but when? BMA are not renting anymore (I confirmed this with BMA) and in fact are returning previously rented houses to the market. On settlement day, there were 55 houses for rent on realestate.com.au, today there are 130+. We don't know what to do. We lost valuable time at the beginning being told to advertise for $2500 per week ("you'll get that easy"), then we moved to $2000, now $1800. Quite frankly, $1150 will cover the mortgage so that is all we want right now so we can sleep at night. Thoughts have been to do this for a 6 month lease (if we can get one at all) and by then things should have picked up – but maybe not.  There is so little press about this. Does any one have some feedback or advice?

    Profile photo of Josh AthertonJosh Atherton
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    A very important factor to note when investing in mining regions is that most of the towns you look at investing in have very small population (less than 30,000 people). couple this with development releases at different times of the year as they are not steady like we see in the capital cities, and projects which have construction phases and operational phases. many of these towns have very strong cycles. both the highs and lows are generally extremes.

    It is important to look into the future as with any property investment and ask yourself where you think the town will be in 10 years. if you like what you foresee it to be, then it is most likely a good investment. the next thing to do is to find the right time in the market to buy. Have a look at what is in demand for rent in the town, is it new or old housing. units that may be more affordable or a grandiose house?

    to relate this back to Moranbah, it is a very small town with a population of less than 10,000 people. there has been and will continue to be a large number of construction projects occur over the next 7 years in the mining industry. Moranbah has seen a lot of owner occupiers sell over the last 6 months to investors, this has occurred at the same time as one of the regions largest employers BMA has been going through some industrial action, only to have that escalate over the last 6 weeks with strikes etc.

    To put this action into perspective for current and prospective property investors, this action has absolutely nothing to do with housing prices in Moranbah. the issue is far greater than that. There are approximately 20 demands from 3000 union represented employees, and the closes one has to housing in Moranbah is they want quality accommodation for themselves and their families. Not donga’s or 3 bed shacks. As a result of the action, BMA have not hired or continued with the re-engagement of contractors for many operation and construction projects until the dispute is resolved.

    Recently as a part of more civil Enterprise Bargaining Agreements in Blackwater, a very positive result was had for property and the town where an increased subsidy scheme was implemented for people who buy in the area. whilst people think this outcome would be bad for property investing in Moranbah, you would be wrong. It is in everyone’s interest that Moranbah grows as a viable service hub for the region. If you want to invest in short term accommodation, buy a motel.

    My view is that once the Enterprise Bargaining is over, there will be once gain another shift in both renting and buying in Moranbah. Companies like BMA need a town like Moranbah to be more than what it is, a motel town. the population demand is there and will continue to grow into the future. The way it is managed needs some re-thinking however. Personally, I find it exciting to see what a town like Moranbah will look like in 10 years. have a look at Port Headland and Karratha and how far they have come whilst maintaining high rents and property prices. Do you think they never had down times due to issues like these?

    Demand at present is for modern accommodation which is relatively new and also affordable for what you get in Moranbah. If you purchased a house in the midst of these times above and it wasn’t on par with the current demands than needless to say you will unfortunately experience a mining town at its worst.

    Believe it or not,I made a higher return on my investing in the first 18 months of the GFC in mining towns than any other time, while people who literally built right next door lost money. Investing in property is no different than anything else. You must assess supply and demand and look at how you will make the greatest, sustainable return for your investment. If you look at it as simply as “build it and they will come” then unfortunately you are going to see hard times, no matter where you invest.

    Profile photo of mellissacmellissac
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    Just noticed some feedback was wanted on Collinsville QLD we bought a place there about 7 months ago. Was tossing up between here and Blackwater. Decided on Collinsville as the entry price was a lot lower for a house. The last few months has seen an increase in sales in collinsville so pretty happy with our decision. Only thing is like any mining town rental demand is very up and down. We have had not issue so far but you never know . We are getting a rental yield of about 10.5%

    I think there is quite a lot of potential growth here as there are 4 coal mines to be built over the next few years.

    Profile photo of waydo77waydo77
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    seems your in the know josh, where do you gain such insightful knowledge?

    Profile photo of ChrisA1ChrisA1
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    Josh

    Reading previous articles on your blog and your comments above about ensuring the population has >30 000 people (and more than 1 employer I assume) as a sustainable investment area, you have favourable comments on Mackay. What are your thoughts on Rockhampton? Appears to tick many boxes with population, several employers, uni etc. However, you don't include Rocky in your trips/analysis??
     

    ChrisA1

    Persistence is 'to keep on keeping on, no matter how hard the going may be'

    Profile photo of KeyStrategiesKeyStrategies
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    Hi Everyone,
    Its been interesting catching up on all the posts since the new year started. What a difference a few months can make and it just demonstrates the volatile nature of investing in some mining towns. I have been following whats has been happening in Moranbah and the surrounding areas with interest for some months now in various forums – My views are as follows :-

     "Rents have climbed but my view is that the rents have peaked at present and have the potential to fall – its simple economics , supply and demand, there are a lot more properties available for rent now ( about 100) than there were pre-christmas (around 10). Plus there are around 300 units under construction and around 200 new dwellings in the pipeline with land releases coming. It's a case of lets see what happens during March and April." That was my posted comment on Terry Ryders (Hotspotting) facebook page back on 12th March.

    And on My Facebook Page back on the 29th September 2011 – "Read this article it has some good info including that mining towns have volatile markets and are highly vulnerable to the cycles of the resources sector". My opinion is that this is the top of the market at present and caution should be exercised – I have a property with a rental yield of 25% on cost but expect it could fall as low as 10 to 12% in the future – If you buy now on a yield of 16% now you could expect that to fall to around 6 or 7% on cost when supply increases or demand decreases in the future."

    So I tend to agree with GloveboxInvestor – That i am also bearish on certain mining towns at present and am adopting a wait and see attitude.

    One of the big factors in Moranbah and Dysart is the number of investors that bought into the market last year, that were taken up by Investment groups and Seminar Spruikers who have no regard for what is actually happening in the area – they just jumped on the bandwagon. And those people will now pay the price of getting caught up in all the Hype.

    Josh, I disagree that towns with populations of less than 30,000 are that small – I have been investing in the Hunter Valley mining town with a population of 20,000 for almost a decade and it is quite self sustaining and stable. The thing is unlike QLD mining towns it has other industries around also. But I totally agree with you on your supply and demand comment.

    CMS – you and many others will need to bite the bullet and make a decision, but now the the wet season is over and once the strikes are resolved things will pick up again. Everyone just needs to be aware that  there are around 1000 new dwellings (according to my calculations) coming onto the market in Moranbah over the next 6 to 18 mths, made up of New 3 story Unit complexes, Backyard developments, Knockdown rebuilds and new land releases and this will impact the rental market. All the info is out there you just need to do your homework.

    I trust that this has been both informative and helpful.

    Cheers

    Profile photo of KeyStrategiesKeyStrategies
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    Warren Buffett once said: “Be fearful when others are greedy, and greedy when others are fearful”. Reading through various posts, articles, blogs and publications has been an interesting exercise this morning. What do you think of this article ?

    http://www.apimagazine.com.au/blog/2012/04/is-the-magic-of-moranbah-over-2/

    Profile photo of CMSCMS
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    I agree with some comments in the article – yes it seems RE agents are keeping properties on the internet for an excessive time. I am curious about the comment about BMA not signing leases for 3 months – I spoke to BMA who said "never", but then a local agent said that they will at some point, but in the interim they are saying this to stop people calling them. Hard to know what to believe. I still think that it doesn't matter what rents are dropped to, if no one will rent – when theh time comes and houses are needed again, I think that reasonable rents  (well, for Moranbah) will be agreed to – back to supply and demand. I suppose part of me has to believe this because I want our place rented out! On the other hand, we are fortunate (sensible) enough to have a buffer that will see us through this (I have heard of devastating stories already from other investors who don't) – but we don't particularly want to see a buffer eaten up by this, especially given what the repayments are.
    Not sure how I can "bite the bullet and make a decision" – we have dropped the rent and happy to drop much further, also keen to sell even at a loss just to be done with it, which isn't likely at present with no one buying- there isn't much more we can do unless anyone has a suggestion. I know there are projects ahead and the weather is clearing – I don't think Moranbah is going under any time soon – I also know BMA is losing millions while striking occurs so there will be an end to that too – also aware the strikes are not about rents (a small part, but not a war-stopper as such).

    Keen to hear if anyone rents or sells in the short term though.

    Profile photo of KeyStrategiesKeyStrategies
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    Hi CMS and eveyone

    Looks like there may be light at the end of the tunnel I just received an email for one of the agents in Moranbah which said in part "Our Rentals Department has just started negotiations with some of the larger mining companies over the past few days regarding new leases that they will be taking on."    Hopefully this is the start of this getting back on track up there.

    Cheers

    Profile photo of CMSCMS
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    I received the same email.
    Apparently local rumour has it that Peak Downs is expecting 2000 workers in next 2 weeks – figures suggested are 1000 FIFO, 500 to purchase and 500 to take up rentals. Those numbers would shake things up. A case of watch and wait.

    Profile photo of moxi10moxi10
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    That's good news for you and other investors in Moranbah, CMS. BMA is not the only player in town, too much going on there and too little accomadation to go around. Rents are likely to drop as investors reconsider their positions, but at the previous levels, there should be a bit of lee way available for a reduction.
      With your reasonable attitude and willingness to be flexible and negotiate a fair price, your place shouldn't be vacant for much longer.

    Cheers
    Tony

    Profile photo of Josh AthertonJosh Atherton
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    Great news about comments from agents and residents in Moranbah. Key strategies, I cant see where I have mentioned to only invest in towns of 30,000 , it may be a typo or it has been misread for 3000. I have been investing in Emerald for a long time and it does not have 30,000 people either.

    It is with greatly unfortunate to hear of the closure of Norwhich Park Mine near Dysart. We can only hope that another smaller company can find a way to make it a financially viable exercise and take it over, Just like Clive Palmer did with the Nickel refinery in Townsville a number of years ago. It looks like a number of the employees if not all will be redeployed in other mines from BMA, including Peak Downs near Moranbah which would also add pressure to the Moranbah Market.

    Whilst I cant offer advise to people who have properties in Dysart, it does strengthen my argument of my comment above of investing in really small towns relying solely on a couple of mines.

    Profile photo of mattstamattsta
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    CMS wrote:
    I agree with some comments in the article – yes it seems RE agents are keeping properties on the internet for an excessive time. I am curious about the comment about BMA not signing leases for 3 months – I spoke to BMA who said "never", but then a local agent said that they will at some point, but in the interim they are saying this to stop people calling them. Hard to know what to believe. I still think that it doesn't matter what rents are dropped to, if no one will rent – when theh time comes and houses are needed again, I think that reasonable rents  (well, for Moranbah) will be agreed to – back to supply and demand. I suppose part of me has to believe this because I want our place rented out! On the other hand, we are fortunate (sensible) enough to have a buffer that will see us through this (I have heard of devastating stories already from other investors who don't) – but we don't particularly want to see a buffer eaten up by this, especially given what the repayments are.
    Not sure how I can "bite the bullet and make a decision" – we have dropped the rent and happy to drop much further, also keen to sell even at a loss just to be done with it, which isn't likely at present with no one buying- there isn't much more we can do unless anyone has a suggestion. I know there are projects ahead and the weather is clearing – I don't think Moranbah is going under any time soon – I also know BMA is losing millions while striking occurs so there will be an end to that too – also aware the strikes are not about rents (a small part, but not a war-stopper as such).

    Keen to hear if anyone rents or sells in the short term though.

    Just curious – Before you wen tand got the property did you research about vacancy rates, and did you take it into consideration? Or are you only finding out about it now?
    What is the vacancy rate in Moranbah for renters anyway?

    Profile photo of CMSCMS
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    Of course part of my DD included vacancy rates – it would be remiss of any property investor not to. In the weeks before Christmas there were few to no vacancies which is when rents (some) shot to just under $3000. January and Feb are typically the slowest times of the year – it just doesn't usually "stop" like it did this year. For the other 10 months of the year, typically houses that are sensibly priced usually have a vacancy filled within a week. I should take back my "sensibly priced" comment – before Christmas companies were paying any asking price without a second thought. I knew about the post Christmas slow-down so we established a buffer accordingly – those who don't have one and are vacant would be hurting right now. For us, this is about cash flow and not capital gain, and even with reduced rent (if it comes to that long term) we are still in front and this will more than cover for the current vacancy. Moranbah has historically had a few "downers" over the years but it has picked itself up again fairly quickly and surged forward. Really if you look at the current and planned projects there is no reason not to expect similar now.

    Profile photo of KeyStrategiesKeyStrategies
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    CMS wrote:
    Not sure how I can "bite the bullet and make a decision" – we have dropped the rent and happy to drop much further, also keen to sell even at a loss just to be done with it, which isn't likely at present with no one buying-

    Keen to hear if anyone rents or sells in the short term though.

    CMS

    I am curious – what type of property do you have and how much do you want for it – you can PM me if you like

    Profile photo of pypy
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    Hi Josh, What is your thoughts on Emerald for next 5 years or so especially it is located between Bowen basin and Gallile Basin?

    Profile photo of KeyStrategiesKeyStrategies
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    Hi Everyone

    The last 3 days has been interesting to observe – All the Doom and Gloom about the Norwich Park Mine closure has been all over the Media yet the announcement made by Anglo American Coal to Double its mine size in Moranbah on the same day has gone virtually unnoticed an as had almost NO press.

    http://www.theaustralian.com.au/business/mining-energy/anglo-doubles-mine-plan-at-moranbah-south/story-e6frg9df-1226323271989

    The same goes for all the conversations in a number of the threads and posts in the forum

    Yes, the mine closure is a setback and for those that got caught in the buying Frenzy over the last 6 months or so they will pay a price (short term I believe) but lets remember that there is so much still happening in the area new mines opening, existing mines are getting expanded, new mines and mine expansions are being considered…and ONE closes. Hardly a disaster for the region or for either Dysart or Moranbah.

    I think this whole episode has been a lesson in what happens when the Greed factors gets into an area and also the Bad News Sells.

    What is the forums opinion?

     

     

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