Gladstone's mining is booming, but property market far from unified in Queensland hotspot

The Queensland location Gladstone, 100 kilometres south of Rockhampton, is a much-touted mining boom hotspot.

But how much do interstate investors really know about the area?

Gladstone is a mining boom town with a vast number of liquefied natural gas (LNG) and coal projects in development.

Santos and Petronas are developing the multi-billion dollar Gladstone Liquefied Natural Gas project, which will process coal seam gas into liquefied natural gas. The project is anticipated to provide 6,000 jobs during construction.

Australia Pacific LNG is a joint venture between Origin and ConocoPhillips to build an LNG plant at Laird Point on Curtis Island. The project will create an average of 10,300 jobs for each year over the 10-year construction period, reaching a peak of 18,600 direct and indirect jobs.

There’s Gladstone LNG, a plant at Fisherman’s Landing in the Port of Gladstone, capable of producing 3 million tonnes of gas per year. It will hire 150 people during construction and have 36 permanent employees.

Queensland Curtis LNG is developing a liquefaction plant on Curtis Island, just off Gladstone, with an capacity of 7.4 million tonnes per year. Construction of the project will provide 3,00 to -4,000 jobs and 800 permanent positions.

And there are plenty of other project mooted and in the works. Property investment experts are spruiking the area as a property hotspot due to the volume of mining activity. 

The Real Estate Institute of Queensland predicts the population of Gladstone will double by 2031.

ANZ’s Australian Housing Chartbook found property prices in Gladstone increased nearly 16% for the year ending March 2012, outperforming all other areas in the state. In April, Queensland Valuer-General Neil Bray found land values in the area had increased 19% over the year.

In Property Observer’s recent analysis of hotspots touted in 2011, we found Gladstone was one of the only celebrated areas to have lived up to expectations. 

However, the most report on Gladstone from PRDnationwide notes there are a number of headwinds facing investors in the area.

PRDnationwide predicts property and land prices will begin to ease egin to ease once new and more affordable housing projects are completed, such as Devine's $1.4 billion Riverstone Rise community, which is being completed in stages over the next 15 to 20 years.

The project is in Benaraby, approximately 20 kilometres south of Gladstone City, and is being built with the aim of providing an affordable and diverse alternative to the offerings within Gladstone City.

The PRDnationwide report says that high rental yields can still be achieved in the current market, but warns investors to be diligent to not only buy at the right price, but to buy something that has competitive tenant appeal.

“Vacancy rates have been quiet turbulent during the first half of 2012, as investor demand grossly outstrips owner occupier demand,” says the report.

“Uncertainty surrounding rental vacancy is exacerbated by an ever expanding fly-in, fly-out workforce, with many workers vacating to mining/construction campsites.

“As a result, many investors are forced to make sizeable revisions to their rental price expectations in order to secure a tenant on a reasonable lease. Given the current median prices recorded across all markets, there is no doubt that some investors, particularly those who entered the market in 2012, paid a premium on their investment with a heightened expectation of strong cashflow.”

In Gladstone, the residential area is made up of nine suburbs: Clinton, Glen Eden, Kin Kora, New Auckland, South Gladstone, Sun Valley, Telina, Toolooa and West Gladstone.

Source: ABS, RP Data

RP Data has no information on the whole area, but an analysis by Property Observer of all its suburbs indicated median house prices increased 16.5% while units dropped 1.95% over the year.

According to RP Data figures, South Gladstone was the strongest-performing suburb in the city. The unit median price went up 19.2% over the last year while the house median went up 23.9%.

For more, download our free eBook Residential Property Investment Amid Queensland's Resources Boom.

The boom growth started in 1996 with the establishment of the Queensland alumina plant in the area, the impact of which is still seen in South Gladstone. LJ Hooker agent Mark Spearing told Property Observer the suburb contains a lot of older Gladstone properties.

“There’s a big difference between a new unit close to the CBD and a 20-year-old unit on the outskirts of Gladstone,” he told Property Observer.

“New units are getting exceptional rents of $650 to 850 a week, while some of the older ones are getting just $350 to $450 a week, especially where there’s been no reinvestment into the properties.”

Spearing says there are also significant townhouse developments in areas 10 minutes from town.

“In Glen Eden, there are two upmarket townhouse developments being built. One of them will be 38 townhouses, and there’s another doing 45.

“Those are very sought after, underpinned by the investment market. They’ll earn about 800 a week.”

He says families also tend to buy in in newer suburbs like Emmerdale Gardens.

“It’s a good development, there’s good parklands, with good properties that have been well managed over a period of time. There’s new shopping centres opening, with new access roads, in a great spot,” he says.

Alicia Williams from RE/MAX Gold says Telina is another popular option for families. It’s a well-established leafy suburb that has been attracting families. Telina is wedged between the two shopping precincts of Kirkwood and Kin Kora.

However she believes the market have topped out.

“Pricing peaked around November last year and since then the market has topped out, experienced a slight pull back and is now steady,” she says.

“However, I still have a positive long-term view for Gladstone and believe we will see our next growth stage pending commencement of construction on each of the LNG plants at Curtis Island as well as other projects like Wiggins Island. 

“It is not only big industry which is a draw card for Gladstone but also the ancillary businesses and service which will come to our region in order to service our growing population.”

Spearing says the market can stop and start as one projects ends and another starts.

“Certainly prices are in a holding pattern as we speak, there’s no question over that. Because of the relatively small size of the market and the relatively extremely large workforce movement, when different stages of major development are completed waves of workers depart then a new wave arrives,” he says.

“There’s a ripple effect as that movement occurs. The rental market changes on an almost month to month basis.

“Each phase has a different requirement but we’re definitely early in the cycle”.

He says about 60% of sales in the last year have been by investors hoping to cash in on the boom.

Gladstone locals are missing out on a lot of business as workers fly-in fly-out but workers are starting to take occupancy.

“One thing I know is, where’s there’s jobs there’s usually a strong property market. And there’s a lot of jobs in Gladstone.”

But while the mining has bought strong property price growth and city development, the developments have raised the ire of environmental groups.

One of the major concerns comes with the pollution of water supplies. The development of the Gladstone harbour included a massive dredging program to make way for large LNG vessels. The area falls within the Great Barrier Reef World Heritage Area and is just one kilometre away from Great Barrier Reef Marine Park boundary.

The dispersal of spoil from the dredging dumping ground into the park is a major concern.

The dredging also stirs up silt which affects the ability of fish to extract oxygen from the water, and then settles n sea grasses and wetlands. This reduces fish stock and is a major concern for local fishermen.

Reports suggest that the five major Gladstone projects will emit 39 million tonnes of carbon dioxide equivalent per year, starting 2014. This is more than 10% of Australia’s 2020 emission targets and 19% of the 2050 target.

There are also major concerns with the effects of coal seam gas extraction, a problem widely in NSW farmlands. Some concerns include the effect of drawing excessive water from the artesian basin; the chance of polluting groundwater; and the risks of watershed damage associated with disposal of highly saline groundwater.

UNESCO is currently deciding whether to deem the area a heritage site in danger.

The team met with representatives from the seafood industry, who spoke of a sickness afflicting local fish, turtles and sea mammals involving skin lesions and cloudy eyes.

For more, download our free eBook Residential Property Investment Amid Queensland's Resources Boom.