Water Side City View

Mining Towns

There’s been a lot in the media of late re Mining Towns and with some of our clients invested in these areas I’m always keen to see what they have to say.

About 4-5 years ago there was a real push for investing in these towns that are supported by mining.  I was always concerned with buying in areas that are only driven by one sector.  As such, during this boom, with many clients keen to invest in the mining towns I decided to travel and have a look for myself.  I decided in the end that the only locations I would invest in would be Gladstone and Mackay, given the larger populations and the more diverse working environments. Both these locations haven’t performed well over the past few years but I’m very glad we didn’t follow other investors into the inland mining areas.

The median house price in Moranbah, 200km west of Mackay, has gone from $750,000 only 3 years ago to $285,000 today.  Rental yields have also dropped from about 10% down to less than 4% now.  A home in Port Hedland was passed in at auction for $360,000 having been bought just 4 years ago for $1.3million. I’m so glad we don’t have clients in these locations.

Places like Mackay have slowed and rental levels have dropped but they are showing signs of recovering.  With the Australian dollar much lower, and if it stays this way, it will make Australian coal a lot more attractive on the global market.  We’re starting to see vacancy rates drop and enquiry levels increase so hopefully that’s the worst of it behind us and we see a slow improvement back to sustainable levels.

As I have always said, buy for the long term and you need to give an investment at least 10 years in the market.