Hi Manni,
Congratulations on what looks like some good research. I'm not sure I'm going to be able to add much though.
Collinsville is out of my research area, although I don't recall it appearing in any "Bowen Basin" Google news alerts, so I'm not aware of any press either. Looks like a sizeable town though. With projects in the area, accom will become scarce. You need to assess what will happen when the projects are over and the town returns to normal. Consider such things as how difficult it is for the town to expand, either by availabilty of land, or because it's just too expensive to get builders up there to create more housing. This situation helps ensure that when things return to normal, you can still let your property.
Interestingly, I spent this weekend touring the upper Surat and Bowen basins looking at the towns there. Unfortunately I seems to have gone right past Wandoan without noticing it! It is off the side of the highway though. I had a conversation with someone at Guluguba just south of there who was talking about mining activity 'across the road', so yes there is speculation in the area. There doesn't seem to be anything existing (mines), so I would personally view a property purchase in the area as a 'speculation' rather than an 'investment'. That's an important distinction for me. It (Wandoan) is also a very small town. It takes a looong time to sell a house in a small town when the boom has cooled off. Be sure you want to own in a small town.
My thinking about Blackwater hasn't changed from a few posts ago, although I've been monitoring again now for a few weeks but haven't seen anything noteworthy.
I'll be writing in the coming weeks about some towns that I did find interesting in that area though, so keep an eye on this thread,
Cheers
Daedalus
Hi Manni, I purchased in Blackwater only a few weeks ago. Very good Rental Yields. Price $235,000 and $470/wk rent with long term corporate lease (2yrs). Rental Vacancy 0%. Long term future looks good, but who knows what can happen. Might be a bit risky at the moment in my opinion but I factored that in when I bought the house. I can still afford repayments without a tenant so I’m willing to ride it out if things go bad and the rent will pay it off nicely in the meantime.
House prices haven’t moved much over the years in Blackwater and the people I bought the house from sold it after one year for a loss. I have hope in China and their need for more coking coal in the future
Andrew
Thanks Andrew & Daedalus,
Collinsville is only 45min from Bowen, I dont know if thats a good thing or bad thing? According to realestate agents there has been plenty of interest in the last month and they are expecting a flood of workers in the coming months. However returns are not as good as Blackwater which I am now leaning towards on further research. There are a couple of properties I am eyeing out….
As for Wandoan there is over 1 Billion tonnes worth of thermal coal and a 30MT/Annum open cut mine is in the advanced stages of development, pre-feasibility as we speak. Check out these sites:
http://www.wandoancoal.com.au/project_overview.cfm
http://www.suratbasinrail.com.au/
Just a few more questions if you don't mind?
1) What are the monthly running costs involved in owning in a mining town? Can you list them?
2) From past experience, when things do cool off whats the average drop in rental returns?
Just doing some analysis around feasibility..!
Once again appreciate your thoughts!
Manni
Hi Mannia,
With regard to expenses, management fees are around the 8% mark. If you get a property manager from a small town, you may need to keep a close eye on them. I've had less than satisfactory experiences – see previous posts.
Rates are about $1400/year. Incidental maintenance can be expensive, because often the local trades do work at the mines for top dollar – so they're hard to find to do work on your property, and they charge top $$$ to you too. Landlord insurance is about $400/yr.
When you're buying, just be careful to buy a freehold property. Some property in the area is leasehold. While this isn't a problem in itself, it might not be what you are expecting. Check before you get too involved with the transaction.
I haven't been in these towns long enough to experience a drop, so I can't answer Q2. Since the rent has doubled on one of my IP's in the last year, it wouldn't be unreasonable to expect it to halve again. You need to be conservative when working out your viability.
Daedalus.
Thanks Daedalus,
Once again appreciate your help! I would be interested to see your investment criteria? If you would like to share it please send me a PM.
I am still sitting on the fence at the moment? With all the uncertainty in the air seems a little risky at the moment. However speaking to local agents in Blackwater rentals are scarce and they are not seeing any major slowdown across the local workforce, just yet. This could change though, will keep a close eye on the local mines in the area, this will indicate the future growth trend!
Manni
Hi,
I have followed this informative thread with great interest over the last couple of months…Thank you to all the regular contributors. I notice it has gone a little quiet since BHP's announcement of job cuts in the area.
I currently own 1 property in Moranbah, and after a couple of months of planning am about to submit a DA for a second house on the block. Total cost should be approximately 250k. I must admit to feeling a little nervous over the last few weeks and especially since the BHP announcement.
My thoughts are that a new 4br house for 250k in Moranbah still represents excellent value. And my thoughts on the area in general (for what they're worth) are that 8+% yields will remain through what may be a lean time (comparitively) for the area. I think the prospects for investors are still very good particularly looking forward to mid 2010 and beyond due to what will continue to be a chronic shortage of housing.I have been reading alot but am certainly no expert on investing or the Bowen Basin and would much appreciate any comment or opinion on any of the above.
Thanks again,
Lee
My opinion has not changed, this is just a bump in the road. Things will flatten out for a while. Towns like Moranbah will continue to prosper. The mines would actually have to close and stop production completely before the shortage of housing would be stemmed in these areas. Coal and Iron ore mines will not close like nickel mines have. Unless China's economy crashes completely there will still be demand for our resources.
I work around the mining industry and have a fair amount of contact with such companies and I honestly feel the media has blown this way out!
Sure there have been some scale back but a mass of this is simply cutting away the rubbish employees that are not needed.
Finally companies have a reason to give employees the flick, that they virtually could not sack before.
Every man and his dog were running to the mines chasing the big dollars, and some were flat out tying their shoe laces.The mines were in deseperate need of staff due to demand and employed any idiot.
The industry has just scaled back to what it was before and I know a number of mines are still employing ( experienced) only!well i live in Emerald, being a small town everyone knows everything…a few builders in town have gone bust, one had his license suspended because he had too many houses and not selling them fast enough…house prices here have dropped a bit, i live in a new estate and so far there's only been one house up for sale…i'm not too worried as things will pick up again after a few years. Best thing to do is not to panic if you have a property in a mining town.
I lived and worked in Emerald and surrounding areas for six years, 'till late 2005 and although the posted comments are very true of the last 6 odd years, I would be very careful in the ensuing 5 or so.
Most of the easy profit has evaporated, since the boom many people invested and drove the prices through the roof, so if you want to buy now the outlay to return equation is a little out of balance.
Also you are very exposed to the overseas commodities market and it only takes one mine to close in the immediate area of your investment for the risk to increase tenfold.
Do some research on the closure of the Gordonstone mine near Emerald in the late nineties, Emerald real estate which had started to boom then, went into a nosedive and only recovered in about 2003.
Be careful people, be wise and do your homework.Picklesam
I'm a little confused on the suspended license issue for not selling?
I have two close mates in Emerald both builders and they stated progress has virtually stopped compared to last year when they were selling off the plan.
This problem is every where and demand is slowing ,and developers are not willing to take the gamble. ( I have noted experienced developers still moving)Trade prices are dropping and now becoming competitive compared to before when they could virtually ask what they wanted.
We are now seeing who the real tradies , agents and developers are in these slowing times.
Once property sold itself, but now we are seeing real estate agents folding , but from what I can see that a mass of these are all new people to the industry who jumped on the wagon.
The same applies to a number of builders who went big over night, and they had room for errors but now it's simply becoming to competitive and people are not accepting any clown.
And then came a bunch of newbie developers who could see a quick dollar, but now things have tightened they are folding and leaving guys like myself chasing them every day for payment.Well, in Dysart, I just had one lot of tenants on short term contract move out, and BMA move in with rent at 1000.00 pw with a 6 monthly rental review on a 12 month lease, and the other tenant has just said they are staying as well and want another 12 month lease at the same amount. But yes the fast growth period may have finished, i've noticed a lot of properties being listed at Moranbah recently, but only a few in Dysart. I'll sit it out I think, the contractors that moved out were told to come back in the new f/y when they were going to start up again.
Thanks Builder Bob.
Hi all,
I have been lurking for some time and would like to thank all for very informative posting. These boards are worth a lot more than a lot of seminars I have been to.
In regard to Dysart…………..I was wondering what the general feeling, for the prospects, of this town is now. I note that there appear to be a lot of properties for sale at the moment (45 ish on RE.com) as we speak.
Is this usual or are people panicking and getting out, if so………..
Do they know something or is it herd mentality??
If it is panic selling, could now be a time for some lowballing??
I am on the other side of the country and it is difficult to get a feel for what is going on right now. Media hype is rife and creating some panic I think.
Thoughts please.
I am in the market for some CF+ to balance out a portfolio that has now become nuetral due to IR reductions.
Thanks in advance.
Chrisv
In my opinion, still too early to get into CF+ in the bowen basin.
I suspect the price of houses for sale is dropping, and the renters are not there, and it's getting worse.
Coal mining companies have slashed contractors and are all looking at approx 30% cuts to their OWN workforce. They will not normally award contracts while at the same time retrenching their own employees.
I think we're 12 months away from a big turn around."BHP Billiton said yesterday it would sack 1100 workers from its metallurgical coal mines as it moves to cut output over the next six months. A BHP spokesperson told ILN the majority of job losses will come from Queensland operations and 70% of job cuts will be contractors.
The hurt to contractors did not stop with the BHP announcement, with news on the same day that Bounty Industries had lost its contract with Anglo Coal at Aquila and would have to let go of 46 contractors and most likely the majority of its 50 employees at the project.
The two announcements are the latest in a growing line of job cuts at Queensland’s coking coal mines.
“Of great concern, and what we have to factor in as a state and a nation, is the impact on regional communities as resource sector job losses flow on through economic multipliers to other industries.”
For example, Roche said, in the Bowen Basin the resources sector is responsible directly and indirectly for one in every four jobs."
http://www.longwalls.com/storyView.asp?StoryID=560799
These towns typically have around 5-10,000 people (anyone know the real number?) – to have that many houses on the market at once is a good sign that people are fleeing. I'm sure you'll be able to get soem bargain places to buy soon, but putting a tennant in them will be much more difficult.
Hi ChrisV,
Welcome to the post. I think it's time for care – but then again – all investment is time for care.
HopefulInvestor provides some interesting information, but it's mostly just media quotes, so might not be anything new for you.
There is certainly herd mentality, both in the housing market and in the mining industry (and the media for that matter!). Having said that, labeling it as 'herd mentality' doesn't remove its effects. It's herd mentality that caused the boom in the first place.
So in this regard, I agree with HopefulInvestor that a turnaround might be some time off. But you need to ask yourself what kind of turnaround you're looking for. If you're looking for boom conditions to return, I don't think that's going to happen.
I'm expecting a slight reduction in values, and maybe a reduction in rents, then a period of stabilisation where both stay steady.
I have 2 properties in the area (Dysart, Moranbah). Both have just been through rent reviews. Dysart held at its current rent (which doubled 6 months ago) and Moranbah increased by 300pw. So I'm not seeing things retract yet. Talking with locals (which I rate as more valuable than reading newspapers), there is some caution, but most reflect the sentiments shared in BuilderBob's comments further up the post.
BTW the reason I selected these towns to invest in was because of the size of the local mines (and where the are in their production cycles), the range of mining companies in the area, the type of coal being extracted, and my perception of the world demand for that product over the next 30 years. Those fundamentals haven't changed – it's the expansion projects that have been mostly affected. So with the fundamentals sound, I'm still happy with my investments in the area.
You might want to think about what your investment fundamentals/strategies are, because they will guide you more effectively than the media.
All the best,
Daedalus
Hi everyone, I have read all the past posts and it is interesting to hear everyone thoughts. I live in Dysart and have been a resident since Saraji Mine was originally built. My husband works at Saraji as does my brother and brother in-law. We own our house here and have just bought another which has just been rented to BMA for $1100 per week for 1 year. Our tennant is an employee of the mines. My brother is waiting for a BMA house to rent and is in a private rental, rented by BMA for him unitl BMA house is available or built for him. We know of a recent person employed permanently who got told he is 80th waiting for a house. With those numbers waiting for a BMA house at one mine alone the rental market looks good to me. Remember only small number of permanent employees are being put off, and of those the mines are asking for people to put their hands up for voluntary redundancies.
If anyone has any questions I will try to answer them. everything is still bustling here and so far very little has changed.. I too have noticed more houses on the market quite a few I have noticed are Housing Commission houses which are the ones sellling for $369000 or a bit above with nothing done to them..Some of the houses in the higher price bracket are taking longer to sell due to people being greedy and the uncertainy in the area. As for people selling because of herd mentality there maybe a few but being a small town i know of alot of houses up for sale as people have retired and moved on, nothing to do with the economic climate.
We have just had Eagle boy pizza shop open and the council is currently puting new permanent shade structures in all the parks as well as extending cemented foot paths all around the town.
The media has a lot to answer for with all the hype and it is hard to not get caught up with all the negativity but it is human nature to stress about things we feel are out of our control. There is enough coal here to see my children's retirement out and maybe their grandchildren. Both the Lake vermont and Mac camps seem to be full and there are still contractors work cars everywhere.
I don';t have a crystal ball (good if i did) but even in rents dropped to between $600 and $800 a week properties are still positively geared.We owned 2 properties here 8 years ago when the town was half full one we rented and the other we lived in. Our rental never went a week not rented, remember their are many people especially the younger ones or those not in the mines wanting accomodation that just cannot afford to pay the high rent prices. So we are not worried about whether it will be rented or not and as for the prices of house going back down to the $40000 and $70000 we paid 8 years agos the growing world would have to have a major slowdown in development and i personally don't think that is going to happen.. Yes growth in China, india and other developing countries has slowed but probably back to a more sustainable percentage.
Happy investing
DessyrayAs always, interesting and informative discussion.
We hold property in the Bowen Basin, for 1 1/2 yrs and 3 yrs respectively. At half the current rentals, we would still be in positive cashflow so can't complain! (How does this make it "too early" to invest in property here!?)
I agree that growth in China and India have slowed, but growth is still expected. ie they need the same amount of product they needed last year, plus mayeb 6-8%. (Not an extra 10-12% as previously.)
China is obviously interested in our resources, as they are looking to buy into Rio Tinto and Fortescue Mining currently.So in my opinion, it is not a time to panic.
I agree prices are coming down somewhat, but I believe that this is related to confidence decline of investors, not necessarily of locals at all. The rental "decline" is only a perception; our year-long lease due April will be for at least $400pw more rent!! Maybe the top layer of icing has just melted a little from excesses just prior to the economic problems.
Still don't know of a better place for rental returns in Australia!
And as rents are way ahead of prices which have come off a bit, the rental yields are better than ever before.quickchick
Dear Dessyray,
Thank you very much for that insider information.
I have 1 rental in Dysart and have been concerned about it given the job cuts and the sudden increase in houses for sale on realestate.com.au. Your information is very valuable, especially for someone living out of QLD like me. As you say, even if the rents suddenly halved, it would still be cf+.
Thanks for taking teh trouble to write.
Best regards,
NinieDessyray
I too would like to thank you for taking the time to contribute to this post.
There are obviously a few concerned landlords out there, me included, and we really appreciate your inside information.
I own property in both Dysart and Moranbah. I currently have them both on the market.
I have just secured a new 12 month lease in dysart for $950 a week and have contacted my tenants in moranbah who are more than happy to re-new their lease at an increase of $200 a week in rent.
I believe that if you look after your tenants and don't be too greedy where the rent is concerned you should be ok.
who knows what the future will hold for the mining towns but I have decided to remove both of my properties from the market and to spend the rest of today shopping for my next purchase.
good luck
fingerscrossed
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