Want to capitalise on the mining boom? Consider Whyalla and South Australia’s Olympic Dam mine: Sam Saggers
The news that BHP Billiton received final approval (or you could say finally received approval, depending upon your point of view) to begin a $30 billion expansion of the Olympic Dam mine in South Australia is certainly welcome news. The environmental impact study on this project was begun in 2005, so this news has been a long time coming. Prices have been dormant since the market rose in 2006 on speculation of the mine going ahead.
In 2007 and 2008, house prices dropped and hit rock bottom and between then and now the market has been sluggish. With Gladstone as a precedent of what can happen to the property market when these huge projects are announced, I would expect higher levels of interest in the Whyalla and Port Augusta markets.
We brokered properties in Whyalla in 2008 at the bottom of the market; however the announcement had been delayed by 18 months. Few imagined that approval would be so long in coming, however investors who bought into the market at that time will, I believe, be able to recycle their equity and tighten their rents as a result of this latest news. Investors can't cash in now. I would wait another three years to see them maximise the best of a market that will heat up.
The Olympic Dam mine is the mothership of projects, so I expect the South Australia economy and workforce to reap the rewards. I think we will see a lot of interest in Whyalla by the middle of this year, with clients looking for capital gains as a spin off from the project. Vacancy rates will tighten up and the outlook is a lot brighter.
Investors should expect to buy into a soft market, and they need to be a little patient to get a growth result. The market offers plenty of housing solutions under $250,000. The market has been really soft with the average days on the market approximately 180 days, so investors will have a great offering of bargains.
The strategy for this market is definitely “buy well” and make your money buying. Get a discount off the asking price of up to 10% and wait for the growth.
The city of Whyalla and nearby Port Augusta will derive a great deal from this expansion. During the construction phase, 6,000 jobs will be created, and the mine will add another 4,000 jobs to its normal operations. Indirectly, the mine expansion will create 15,000 jobs, and the total number of jobs becoming available will total 25,000.
Whyalla is a city that has its urban planning already in place. It could fit twice the amount of people it currently has. Whyalla has been asleep for far too long, relaying mainly on its steel industry and port. It will act as a service centre, so all aspects and industry of the town will do well.
Even though Whyalla has other industries doing reasonably well right now, I believe this announcement will be of huge benefit. The town has been ready for 30 years for this to happen.
One would only have to look at higher house prices and associated wages in Port Lincoln, which relies on tuna fishing and export the tuna to the Japanese, to see what can happen to house prices when an industry actually works in the air peninsular. Port Lincoln house prices are about $40,000 more than current prices in Whyalla.
There is plenty of time for investors to jump into this market. The next nine months will be interesting to watch. I would monitor this market closely now and it will be pivotal to see the reaction of locals and interstate investors. Now the premier of South Australia has signed off on the deal, I believe it will be game on. Many are tipping it as the Gladstone of SA.
BHP’s planned $700 million desalination project to support the Olympic Dam project and the $600 million planned port expansion of nearby Port Bonython will just add to infrastructure that will boost the towns prospects.
Whyalla is emerging as the preferred location for many mining companies looking to tap into the resource-rich area, that includes rare earth oxides, phosphate, gypsum and uranium oxide. Additional factors culminating as growth drivers for Whyalla include access to key infrastructure such as a good road, rail and port facilities, access to a skilled workforce, proximity to seawater for a desalination plant, and the support of the South Australian government for many new miners and projects.
Sam Saggers is CEO of Positive Real Estate.
Photograph by Wayne Thomas, courtesy of Flickr.
