Chinchilla, Queensland: Mining hotspot or one underpinned by marketeers?

Mining towns like Chinchilla in Queensland’s Surat Basin offer potential for capital growth.

However, its promotion (and others like it) should also serve as a reminder to investors that they should bear in mind who is making the recommendation, what interest they may have in the hotspot and whether they will earn income from selling real estate in this area.

Among those promoting Chinchilla is Sam Saggers of Positive Real Estate, who describes it as a mining boom town that should be on the “radar” of all property investors.

Saggers says he expects Chinchilla will soon have rents that rival those in Moranbah and Port Hedland, and says average annual price growth has been at 17% – “with no signs of stopping any time soon”.

“Chinchilla has a diverse economic base,” Saggers reassures investors.

“This small but growing region is known as the ‘Home of the Melon’, which is a well-deserved name considering that a quarter of Australia’s watermelons, rockmelons and honeydew melons come from this region.”

“Chinchilla doesn’t rely solely on mining for its ‘bread and butter’.” says Saggers. “The area has a big agricultural base, selling produce such as cotton, wheat, barley and sorghum. They have large cattle and pig farms, as well,” he says.

While this may all be accurate, investors should bear in mind that it is Saggers’ job to promote all the best that Chinchilla has to offer as he sells many properties in the mining town and others like it. Saggers does not hide this fact: you can find examples of off-the-plan projects he is marketing in Chinchilla, Mackay and Gladstone on the Positive Real Estate website.

But even Saggers himself acknowledges that there are risks to investing in mining towns and investors need to consider that mining demand could slow, so investors must assess the risk of that happening.

And, he says, not all mining towns are wise investments.

He describes Moranbah, Middlemount, Dysart and Karratha as mining towns where “rents have been driven out of control from the mining boom” and where he expects a “market contraction”.

Chinchilla, Mackay and Gladstone though are not on the list.

Surat Basin Property Group is also promoting Chinchilla and other nearby Queensland mining towns as “opportunities for ‘mum and dad’ investors to capitalise on the country’s resources boom”.

Similar to Saggers, the SBPG does not keep it a secret it has a vested interest in Chinchilla.

The company has its headquarters in the town and has “land holdings in the region that will ultimately deliver approximately 2,500 dwellings”.

SBPG has already built and sold 200 house and land packages in Chinchilla.

It should not be surprising then that SBPG chief operating officer, Jason van Hooft says opportunities for investors in the Surat Basin area are “unique in Australia”.

“For a start, we are not that isolated, being only 3.5 hours' drive from Brisbane, and secondly the towns of Chinchilla and Miles are long established country communities with existing infrastructure, existing thriving communities and broad-based economies.”

“If you like, the resources boom is the icing on the cake for these centres,” van Hooft says.

SBPG is offering house and land packages from $390,000 to $452,000, which it says will attract rents in the order of $550 to $800 a week “with a waiting list of prospective tenants in a number of the towns”.

“Similar properties, probably not as well built, in Western Australia’s mining regions would command prices of around $800,000 to $1 million,” van Hooft adds.

SBPG currently has 60 residential blocks available to be developed in Chinchilla and Miles and hundreds more in the pipeline; van Hooft says the certainty of tenancy and the potential for capital gains (16% on average over the past 10 years) cannot be duplicated anywhere else.

All of this can sound enticing, but investors should ensure they also obtain an objective opinion of locations like Chinchilla.

While there are many positives about investing in these locations, there is significant risk as well – risk that will not be highlighted by anyone with a vested interest or who stands to earn commission on property sales.