Are some mining towns too hot?

It's been 5 weeks now since settlement with no tenant. Gossip suggests that this won't end any time soon, with some saying up to 6 months. Who can predict this though?
Does anyone local have any thoughts? At this stage we will drop our rent to the minimum and offer a 6 month lease, and hope someone takes it. My thoughts are though, that even if we offer it for $1, if there are no renters, then it makes no difference. With all these new projects happening though, where are all the people? They can't all be in Mackay.

House prices in Moranbah have dropped.  I had my basic 3 bedroom highrise valued at $720,000 only 4 weeks ago.  The agent told me that he could sell it at this price within 24 hours.   I have been considering selling but it now seems that my house may only be worth $620,000 in "todays" market.   I missed the small window of opportunity

I have a great Company tennant in place paying $950 a week in rent and I purchased my house 4 years ago for $350,000 so I am not concerned at all.  I can afford to drop my rents significantly if i have to.

Banks are a little nervouse about lending in the area as well apparently. 

In my experience the Mining Towns are a roller coaster ride for sure.  But I am confident that if i am not too greedy with my rent and i act quickly on maintenance issues I will continue to keep my tenant.   

I have decided not to sell at this time.    There is too much going on in and around this town for it to go too far backwards anytime soon (my opinion only)  I am not sure that my house will ever be worth $720,000 again though    

Its a rocky ride but one I have been happy to take  

I'm sorry to say, but the ship has well and truly sailed on Moranbah.
I wouldn't touch it with a 10 ft pole now as ALL the signs are saying that it's maxed out and is now on it's way back down to a more realistic position in the market.

Forget Moranbah, start looking at locations that are going to be the NEXT Moranbah. That's where there money to be made.

Emerald has plenty of potential and is still very affordable to get into. Don't make the mistake of looking at the past, look to the future and what it has in stall.

This article from SPI Online came across my desk today.

"Moranbah rents collapse as mining giants freeze leases

Tuesday, 3 April 2012

By: James Mitchell

Moranbah is in the grip of a rental standoff led by a number of mining companies unwilling to pay up to $3000 a week to accomodate workers, Smart Property Investment can today reveal.

The Moranbah property market is one of the favoured investment hotspots in the country with investors averaging yields of between 10 to 15 per cent.

But with mining companies refusing to rent any more properties in the area, according to some sources, investors could see a quick contraction of their yields and a sharp increase in vacancies………………………………………………(read on for more)

Interesting for sure but isn't it a mere question of supply and demand?  If the companies want the work done- their employees have to sleep somewhere-  Unless of course they can instantly create hundreds of new dwellings? Does it mean the companies know something we don't or is it just a case of construction phases of projects are nearing completion and the total number of workforce to maintain the projects will be significantly less?

And another article from API couple of days ago….

http://www.apimagazine.com.au/api-online/news/2012/04/property-bubble-bursts-in-moranbah-but-for-how-long

mrs p wrote:

Interesting for sure but isn't it a mere question of supply and demand?  If the companies want the work done- their employees have to sleep somewhere-  Unless of course they can instantly create hundreds of new dwellings? Does it mean the companies know something we don't or is it just a case of construction phases of projects are nearing completion and the total number of workforce to maintain the projects will be significantly less?

 Hi Mrs P

You make a very good point that the mines will still require accomadation for their workers, Obviously the Mac camps accomadate a lot of them, but many employees would not be satisfied by this style of accomadation. It seems as though (understandably) the mines are attempting to reduce some of the short-term pressure that has forced rental and purchase prices skyrocketing in
Moranbah. It's obvious that supply is not keeping up with demand, so it seems as though BMA is doing it's best to hold back demand in the short term to reduce pressure.
  In answer to your question "is it just a case of construction phases of projects nearing completion?" I can tell you from personal experience and knowledge that the time and workforce required to complete projects on the scale of those currently under construction near Moranbah are no where near their peaks. And as all of us who follow these forum threads closely, or perform independent research, are well aware, there are many more projects still on the drawing boards that should ensure long term demand for accomadation in the area
  I personally would expect the rental demand to return to it's recent high levels in the near future, as there is no short term solution to the lack of supply in Mornabah, and I suspect that the combined efforts of the mines to hold back demand will have a limited impact in the near term. 
  However, it is obvious that investors who have recently purchased at elevated price levels, expecting high yields to cover their loan repayments, will be experienceing stress currently as they wait for demand to resume. 
  There are some obvious lessons for all of us here.

Hi Again Everyone,

Rereading through the posts in this thread has made me think – The short answer to the question is there are mining towns that are too hot  at present – Dysart peaked last year and dropped, Moranbah is going thru some issues now – I commented on this back in Sept 2011 on my facebook page "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."

Having said that I believe that there is still good long term potential in the area and that this is a short term hiccup that will pass and will sort itself out. The dramatic headlines of Prices drop by $100K and rents drop by $800 per week are somewhat misleading as there are based on asking prices not on actual market prices achieved. You can ask whatever but the market price is what someone will actually pay.

I still believe there are opportunities else where and you just have to look around. Finding another Moranbah will not be easy as it is pretty unique as far as yields are concerned but then I don't think one has to. And for those who chase big returns there is a lesson here in risk management.

I am adopting a wait and see attitude on Central Queensland and am investing back in the Hunter Valley for now. The returns are not as high but the market is stable and demand is constant as the saying goes "little fish are sweet".

Cheers and happy investing

Has anyone bought recently in Emerald? How are the bank valuations going there when it comes to getting finance? Are they valuing the houses much lower like they were in more high risk areas like Moranbah?

Hi Key Stategies

 Your summaries of the developments and new accomadation to be supplied for Moranbah are interesting. It will be interesting to see if there will be enough new supply to meet demand. It is apparent that the mines, BMA in particular, have decided that rents in Moranbah have risen to unacceptable levels, and are holding back demand to reduce pressure. And the strikes are also probably  reducing demand as well. However, unless I'm mistaken, the strikes should not be affecting the construction crews,
who are usually sub-contractors.
  Although demand for accomadation should pick up again soon, the recent inflated rental rates may not be attainable again. I would be quite happy if I had purchased a property there a year ago. After prices and rents went up, I made the decision that it was too late for me to get in there. Trying to get in on the tail-end of a comet is obviously not a safe option. I'm happy to watch and learn now. Lessons there may be applicable elsewhere.

Tony