Hotspots: Investors mine for yields of up to 16% in Moranbah
As we look to what's ahead for 2012, Property Observer is republishing some of our most noteworthy stories of 2011.
The small town of Moranbah in northern Queensland is drawing investors from across Queensland and as far as Western Australia with rental yields of 15% as mining activity picks up after the January floods.
Located along the Peak Downs Highway between Mackay and Clermont, in the resources-rich mining region of Isaac, Moranbah has experienced a rapid house price rise in the past year. According to RP Data, the Moranbah median house prices rose 5.2% over the past year to $463,000.
According to RP Data, there have been 131 sales in Moranbah for the year to date, and of these 109 were house sales.
Properties returning high rental yields include this three-bedroom house on Bernborough Avenue (pictured below), which sold in August for $585,000. It has been put in the rental pool asking $1,800 a week, representing a yield of 16%. It was marketed by Julie Williamson Real Estate as having a weekly rental potential of $1,400 per week. The 900-square-metre block traded at $15,000 in 2004 when it sold by BHP Mitsui Coal.
The most expensive property (below) sold this year was a contemporary four-bedroom house on Bernborough Avenue that was built on an 800-square-metre block of land that last traded for $72,600 in 2006. It had been listed for sale in 2008 at $799,000 and did not sell. In June, it sold for $840,000.
On the same street, a three-bedroom fibro house built in 1982 that sold for $445,000 in 2009 was recently sold, having been listed at $590,000.
According to the REIA, the resource-intensive regions of Isaac ($445,000) and Gladstone ($415,000) have showed the highest median house prices of any council region in the state outside of south-east Queensland and are on an equal footing with Brisbane, where the median price currently stands at $435,000 (a drop of 5.4% for the year).
The major coal mining projects underway are the Goonyella and Peak Downs coal mines, operated by the BHP Billiton Mitsubishi Alliance (BMA) and Anglo Coal’s Moranbah North mines.
Demand for rental accommodation and new residential developments has received a further boost with the Queensland government ruling earlier this month that it will require 80% of BMA employees across all operations live in the region where they work.
BMA will be required to build 400 homes, the first 160 to be built in Moranbah by June 2013, and the remaining 240 across the Bowen Basin over the following four years.
Infrastructure investment continues to pour into Moranbah with Leightons subsidiary John Holland recently selected as the preferred tenderer for the construction of the $400 million proposed Connors River Dam to Moranbah Pipeline.
The project involves the construction of 136 kilometres of large diameter buried pipeline that will carry around 45,000 megalitres of water per annum from the proposed Connors River Dam to the Bowen Basin and surrounding areas and help meet the water supply needs of the resources sector. John Holland is expected to be confirmed as principal contractor in March 2012.
Hotspotting.com.au director Terry Ryder tells Property Observer he does not generally recommend mining towns to property investors, “because they are at the high-risk end of the investment spectrum” but if he had to suggest a good case study it would be Moranbah.
“It has had a remarkable track record of capital growth (averaging 28% per year over the past decade) and providing 9% to 10% rental returns. Moranbah managed to avoid any serious price decline post-GFC and is now trending up again with the new resources boom,” he says.
Generally though, he warns that mining towns have volatile markets and are highly vulnerable to the cycles of the resources sector.
“When the GFC struck, we saw vacancies in some mining towns go from zero to 10% almost overnight, as miners downsized or closed mines completely,” he says.
Realestate.com.au lists 125 houses in Moranbah for sale starting at $520,000 for a three-bedroom house and 30 properties available to rent, with the asking price for a three-bedroom house at $1,500 per week.
According to Bella Exposito from Moranbah Real Estate, who has worked in the area for 34 years, prices have really picked up since June. Her agency has 25 properties under contract, and her most recent sale was a three-bedroom house for $600,000.
“This property would have sold for around $450,000 a year ago,” she says.
Bella says 90% of the properties are rented by mining employees or contracted tradesmen, with mining companies footing the rental bill.
She flies out regularly to meet with investors in Melbourne and Sydney and says demand is very strong.
Another local agent, Roz Robinson, from LJ Hooker reports similar investor interest and “huge demand”.
“We are selling some properties within 24 hours if not quicker. We have an extensive buyers’ list… There are a lot of investors from WA,” she says.
Robinson attributes the demand to the mining activity and says while new land is being released for development, she expects it to be absorbed quickly and to have no impact on pricing.
Earlier in June it was announced that a 104-hectare parcel of land would be fast-tracked to improve the supply of residential land and ease housing affordability in the township. The site is to be jointly developed by the Urban Land Development Authority and BHP with plans for 1,500 houses.
Bill Moss, founder of the Midwood Report, says mining towns like Moranbah and Gladstone are seeing annual rental increases far greater than any other parts of Queensland, as much as 38% in some cases.
“Coal mines have been resurrected after the January floods. Since they have restarted, a lot more people are coming back to mining towns,” he says.
“From March onwards there has been a lot more demand for housing in the Bowen basin” – a 60,000-square-kilometre portion of Central Queensland that includes Moranbah, Clermont and Emerald.
The Bowen Basin region:
