FIFO workers responsible for housing price falls, not rises: Terry Ryder

Terry RyderFebruary 25, 2013

In a startling misreading of a situation, AAP reported recently that fly-in, fly-out workers were the reason homes were “selling for 10 times their real value” in mining towns.

AAP’s clanger was compounded by The Australian, which published the report verbatim.

At the end of 2013, when I hand out my annual awards, this piece will be a strong contender for "worst article of the year".

The spectacular claim that homes were selling for 10 times “their real value”, right at the top of the article, was not explained or justified later in the article.

It simply stated: “As locals miss out, the influx of temporary workers is creating housing shortages, driving up real estate prices.”

The article didn’t advise where this unprecedented phenomenon was occurring, nor how the conclusion was reached that sales at a particular price level were in fact 10 times their true value. If multiple sales are occurring at those prices, then that constitutes true value, regardless of disaffected locals claiming it’s 10 times what they’re really worth.

But the bigger mistake is the befuddled notion that workers who don’t live in a town, and therefore do not buy or rent there, can somehow be responsible for local prices rising. The impact of extensive use of FIFO workers is the opposite.

If the federal government banned the use of FIFO labour, it would cause rents and prices to rise because it would mean everyone working on a project needed to live locally. If people feel mining town prices are 10 times higher than they should be, how would they feel about prices being 15 or 20 times higher?

The use of FIFO workers actually removes pressure on local rents and prices. The workers fly in or drive in for their shift, stay in temporary workers accommodation provided by the mining company and head home when their shift is done.

There are all kinds of negative impacts of this – and this is what the recent federal inquiry looked at – but rising rents and prices is not among them.

Last week it was announced that BMA (the BHP-Mitsubishi Alliance) planned to have 100% FIFO workers on two new mines in Queensland’s Bowen Basin. The Moranbah Airport, a key entry point for the FIFO trade, has just had a $46 million upgrade to cope with the extra traffic.

Decisions like this have all kinds of impacts on towns like Moranbah, but they don’t include pushing up property prices because none of the FIFO people live in the town. Moranbah rents and prices are falling right now, with residential vacancies up around 7%. In nearby Dysart, vacancies are approaching 15% and rental yields, previously above 10%, are now down around 5%.

BMA, having downsized its workforce in the area last year, is now planning to move to 100% FIFO workers. It will cause prices to drop, not rise.

All of this creates a new phenomenon for property investors: buying in the locations where FIFO workers live with their families and spend their above-average incomes, rather than in the locations where they work.

In Western Australia, a huge share of the workforce on iron ore mines comes out of the Perth region. In Queensland, FIFO workers are clustering in Mackay, Townsville, the Whitsundays and Hervey Bay.

Terry Ryder is the founder of hotspotting.com.au

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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