Investing wisely in property involves following the money trail to benefit best from the mining boom: Terry Ryder

Investors need to think laterally to get the most out of property. The best way to exploit a situation is often something other than “the bleeding obvious”.

At a seminar for property investors in Adelaide, the only thing that seemed to interest everyone was: What’s the best way to benefit from the Olympic Dam expansion?

The first thought was to rush off and buy property in Roxby Downs, the site of the big BHP Billiton mine destined for a $30 billion expansion.

I thought there were better ways. Roxby Downs will no doubt be buzzing when the big miner hits the Go button, but where will companies getting the big contracts be based? Where will their people be living? Where will the mine workers be spending their big fat pay packets?

There will be a hefty component of fly-in-fly-out during the construction phase, with on-shift workers living in a temporary accommodation village. Where will the off-shift workers be living? In most cases, not in Roxby Downs. The town will feel plenty of pressure on its services but won’t necessarily enjoy the benefits of workers’ spending.

Adelaide’s property market will be a major beneficiary. That’s where the key companies providing services to the project will be based. Those that win big contracts will expand, and the people who get the jobs will need somewhere to live. I’d be buying in Adelaide.

Regional towns like Whyalla and Port Augusta will play big roles in the projects, and jobs will be created there. There may be more upside for investors who buy there because prices are lower than in Roxby Downs, which is already expensive (median house price $415,000, compared with half as much in Whyalla and Port Augusta).

Property investors seeking opportunities from the resources revolution need to follow the money trail. The spinoffs from a major project can ripple across the nation. In some cases, they can ripple halfway around the world.

Here’s a money trail example. The trail starts in the UK, where there’s a very big natural gas company, the BG Group. It’s decided to invest big time in gas resources in Queensland, including a single project worth $18 billion. It’s extracting coal seam gas in the Surat Basin west of Toowoomba.

From there the money trail is delineated by a gas pipeline that snakes 540 kilometres across the state to seaside Gladstone, where a massive processing plant is being built on Curtis Island.

The plant needs $70 million worth of pipe projects and has handed the contract to Tyco Water.

Tyco has a factory in Wacol in Brisbane’s south-west and needs to hire another 100 workers and double its shifts to service the BG contract. It will also need 20,000 tonnes of steel to make the products BG needs in Gladstone.

Where will it get the steel? That will come from BlueScope Steel, a company based in Wollongong in New South Wales. That’s particularly good news for the Illawarra because BlueScope has been struggling lately and has cut its workforce.

So the benefits of all this will be felt in markets in the towns of the Surat Basin, Gladstone, Brisbane and Wollongong, all stemming from a decision made in London. And that’s just one relatively small contract from a very large project that will hand out work worth billions of dollars over the life of this venture.

In one sense, investing wisely in property involves following the money trail.