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The Harder They Fall: Moranbah is Australia's worst performing housing market; House values in the remote Queensland mining township dropped nearly 40% in the past year
Topic Started: 27 Oct 2013, 11:53 PM (5,568 Views)
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The harder they fall

Lisa Allen
October 23, 2013 12:00AM

WHEN Tim Lawless ran the figures on the 50 largest falls in median house and apartment values across Australia, the research director for RPData discovered Moranbah - where he owns a couple of investment properties - was the nation's worst performer. House values in the remote Queensland mining township dropped nearly 40 per cent in the past year.

"Moranbah's housing market staged a substantial run-up in values during the resources boom, but has more recently come under downward pressure as commodity prices peaked and housing demand has fallen away," Lawless says.

"You could not continue to expect a typical detached house in Moranbah to rent at $2500 a week," he says. "The price run-ups were absolutely unsustainable."

Despite reports of over-heated residential markets in inner Sydney, high volumes of transactions in Melbourne, and improvements in Brisbane's high-end housing market, according to RPData's research, prepared exclusively for The Australian, there are still plenty of real estate bargains.

Surprisingly, many of them are in capital cities, with Melbourne accounting for 28 per cent of suburbs on RPData's top 50 list, Canberra 12 per cent and the Gold Coast 10 per cent in the year to July 31. The reasons for the sagging prices are diverse.

Canberra's median unit prices are dropping because the market is awash with vacant apartments, but in the northern rural Sydney suburb of Galston prices are plummeting because of the continued sluggishness of the lifestyle housing market.

Beach destinations in northern NSW fell because buying a block of land and building a new house costs far less than buying an established home.

Queensland mining towns figure strongly on the list, along with the Sunshine state's lifestyle centres: Cairns, the Gold Coast, and the Sunshine Coast.

Westpac senior economist Matthew Hassan says there have been significant corrections in the tourist centres of Queensland in the past couple of years, but they have now started to stabilise.

"But it's interesting the mining towns are now starting to be picked up in the data," says Hassan. "Most of them are coming off a very strong run and abrupt slowdown in conditions in the mining sector."

However, Melbourne appears to be suffering most, particularly the Docklands and Southbank, according to SQM Research managing director Louis Christopher. He says the city has 46,000 properties on the market whereas Sydney has just 23,000.

"There is an oversupply situation," Christopher says. "The Australian Bureau of Statistics has been reporting fairly flat to falling house prices in Melbourne for the past three years; there has only recently been a positive gain."

He's more upbeat on the Gold Coast. "Back in 2011 we thought the Gold Coast was a basket case, we were very bearish," he says. "Our latest take on the Gold Coast is the worst is now behind us and we are more optimistic than we have been in five years."

Nevertheless, median values continue to plummet.

Ray White Surfers Paradise managing director Andrew Bell puts the slump in apartments in the Gold Coast suburb of Molendinar, where values dropped 29.4 per cent in the year to July 31, down to the better value in Southport and Surfers Paradise. "There's been a flood of sales in Molendinar, a lot of vendors are choosing to move the stock and accept lower prices," he says.

Bell reckons the 15 per cent drop in houses in the outer Gold Coast suburb of Jacobs Well comes down to its location - the middle of nowhere.

"There's still a lot of sugar plantations in that area; it's still got a ways to come to full maturity. There are more central areas where people think there is better value," Bell says.

The Gold Coast's upmarket Mermaid Beach comes in at 49th on the list, with a median value drop of 12 per cent to $833,022 in the 12 months to July 31, and a five-year slump of 46.2 per cent.

Bell notes Mermaid Beach's real estate market almost doubled in value between 2005 and 2007: "No market can double that fast without taking a correction ...

"We do know there were a lot of questions raised about a number of sales that occurred on Mermaid Beach in 2006 and 2007. People shied away from the absolute beachfront, waiting for clearer signs of where the true market was."

On a brighter note, Bell says Mermaid Beach is at a turning point, with buyers starting to return. "People are getting a true indication of where the market is now."

Two Cairns suburbs also made the top 50 list. Median unit values in Westcourt slumped 16.6 per cent and 13 per cent in Parramatta Park to an average of $181,557 for an apartment.

"Units are not returning as well as they did in Cairns because body corporate fees have gone up due to the insurance hike because of natural disasters such as Cyclone Yasi," says agent Nickoli Obersky, of One Stop Property, in Cairns.

"In Queensland, we are a high risk, according to the insurance industry."

Body corporate fees in Cairns have doubled from $400 a quarter to $900 a quarter over the past couple of years, pushing investors out of the market.

"This is why prices are going down," says Obersky.

Further down the coast, near Noosa, unit prices dropped 14.5 per cent at Peregian Beach, local owners blaming council planning policies on the declines.

"Very few of the units at Peregian are along the beachfront," says one owner, a prominent Queensland property executive. "They are in secondary locations, there's been nothing new built there for years, it's older stock. As a result, if people want to sell them they have to meet the market."

But Noosa Heads also features on RPData's list, with apartment prices falling 12.5 per cent in the year to July 31 to a median value of $542,411. Over the past five years they dropped 22.6 per cent.

Read more: http://www.theaustralian.com.au/business/property/the-harder-they-fall/story-fn9656lz-1226744775924
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peter fraser
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Moranbah is a very tough rental market at the moment with rents down under 50% of the peak, but I'm told that there are 3 new mines being developed. It will be back although I'm not a mining town investor - too volatile for my liking.

Some of those other places like Peregian and Noosa look very attractive buying though.
Any expressed market opinion is my own and is not to be taken as financial advice
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Shadow
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Evil Mouzealot Specufestor

Crazy Dave/Ted/MMM/Fulvalda etc said Moranbah would buck the trend, rising by 20% while house prices fell across the rest of Australia.

Seems Moranbah did buck the trend, but in the opposite direction. Most of Australia rose, but Moranbah is the worst performing market in the country, crashing 40%!

Ted is a great contrarian indicator. Do the opposite to what he recommends...

dave289
 
http://australianpropertyforum.com/topic/9395248/1/#post8291994

'my stance on the direction of house prices is for them to come down quite a bit and for a good period of time . However , I do believe that there are quite a few mining towns for which you will see growth , some over 20% this year . I believe both Dysart and Moranbah will go up by over 20% this year'
How is Dysart going?
Edited by Shadow, 28 Oct 2013, 10:33 AM.
1. Epic Fail! Steve Keen's Bad Calls and Predictions.
2. Residential property loans regulated by NCCP Act. Banks can't margin call unless borrower defaults.
3. Housing is second highest taxed sector of Australian Economy. Renters subsidised by highly taxed homeowners.
4. Ongoing improvement in housing affordability. Australian household formation faster than population growth since 1960s.
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peter fraser
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Shadow
28 Oct 2013, 10:30 AM
Crazy Dave/Ted/MMM/Fulvalda etc said Moranbah would buck the trend, rising by 20% while house prices fell across the rest of Australia.

Seems Moranbah did buck the trend, but in the opposite direction. Most of Australia rose, but Moranbah is the worst performing market in the country, crashing 40%!

Ted is a great contrarian indicator. Do the opposite to what he recommends...


How is Dysart going?
Try using the SQM vendor confidence index for Dysart, that is a very good indicator.

Prices in mining towns were just outrageous, and even now they are still very high. Sydney buyers would be surprised to find that prices were higher than Sydney.
Any expressed market opinion is my own and is not to be taken as financial advice
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After Decade of Soaring Prices, a Queensland, Australia, Mining Town Is Hurting

Rhiannon Hoyle
June 8, 2014

As China's growth has slowed, residents have abandoned Australian mining towns like Moranbah that once benefited from Beijing's boom.

MORANBAH, Queensland—Two years ago, real-estate agent Bella Exposito said she was selling as many as 25 houses a day as soaring coal prices lured workers and investors to this flyspeck Outback town.

As of May this year, she has sold three.

A cream-and-brown weatherboard house near her office rented for nearly US$7,000 a month when the region's coal industry was booming; now it has been empty for 12 months. Downtown shops have gone vacant. At Café 17, a local diner serving eggs and baked beans in the morning, visitors could fire a cannon and not hit a soul some days.

"There is a lot of hurt in the town," says one mine worker employed at the Goonyella Riverside coal mine run by BHP Billiton Ltd. BHP.AU +0.33% and Mitsubishi Corp. 8058.TO -0.10% , which is among the many operations to pare workers over the past year. "It feels like it is dying a slow death."

After a decade of soaring commodity prices, this is what it looks like when the party starts to end.

For years, the global grab for coal, iron ore, copper and other commodities brought riches to small mining communities across the globe. It also helped lift the broader economies of resource-rich nations from Peru to Mongolia to Indonesia. In Australia, a heavyweight in the industry, the boom helped the country sidestep recession when other developed economies hit the wall in recent years.

But more recently, commodity prices have fallen, in some cases dramatically, because of jitters over the cooling economy in China—where growth in commodity imports has slowed—and rising supply from mines planned when markets were booming.

Prices for steelmaking coal have slumped by half since the start of 2012 to around US$110 a ton, their lowest level in seven years. Iron-ore prices have dropped to less than $95 a ton from a peak of more than $190 in 2011, while copper, gold and other commodities have also declined.

While current prices are still generally higher than a decade ago, and optimists hope for a recovery, prices are low enough that some mines are now losing money. Big resources firms like BHP, Rio Tinto PLC and Anglo American PLC have vowed to strip billions of dollars from their annual costs to safeguard profits and improve returns to shareholders.

That means shuttering mines, delaying new projects and slashing jobs in communities that have benefited from the boom. While not all mining towns are as bad off as Moranbah, the downturn is a reminder that overreliance on commodities can be dangerous, even in places that seemed to have everything going for them not long ago.

In South Africa, producers of platinum, gold and coal have cut thousands of jobs, including in smaller communities like Carletonville, west of Johannesburg in the country's Witwatersrand goldfields. Municipal leaders there expressed regret in their most recent annual report for a "problematic" over-dependence on mining, while the national government is licking its wounds from lost funding from mining and petroleum royalties and leases, which dropped 20% in the year ended March 2013.

Overall economic growth in South Africa slowed to 1.9% last year from a 2000s peak of 5.6% in 2006, in part because of weaker resources revenues.

In Brazil, whose economy soared on the back of iron ore and other commodity exports, forecasters now expect growth to be as little as 1.5% this year, down from 7.5% in 2010. Jobs at mines in places like Parauapebas—a town that sprouted up on the edge of the Amazon when mining giant Vale SA started producing iron ore in the nearby Carajas hills in the 1980s—have become scarce.

"I've been living here since '97, and there has never been such a lack of jobs," said 38-year-old Benildo Oliveira dos Santos, a mechanic, as he waited in line outside an unemployment office late last year.

In Australia, leaders are struggling to replace revenue and jobs from a resources boom many people thought would last for years to come, based on the expectation that China's heated growth would absorb ever higher amounts of resources for decades.

As mines lay off workers and cut spending, retailers in Moranbah, Queensland, are struggling. Brian Cassey for The Wall Street Journal

Iron ore and coal are the country's largest exports, and eight of the country's top-10 goods and services sold abroad are commodities. At the peak of the commodity surge a few years ago, labor was in such short supply that mine-site truck drivers commanded salaries of A$200,000 (US$185,750) a year.

Over the past 18 months, the Australian mining sector has cut an estimated 30,000 jobs, according to Jody Elliott Consulting, a resources recruitment specialist. Last year was the worst year for job growth in Australia in almost two decades, largely because of commodity-sector weakness, while the national jobless rate recently reached a decade-high of 6.1%.

Australia's economy is still growing: it expanded about 2.4% last year compared with a recent high of 4.5% in 2007. But it is getting harder to plug holes in the national budget without surging mining royalties. The national government recently forecast a A$47 billion budget shortfall for the current fiscal year ending June 30. Spending on resources projects has been falling at its fastest pace in 14 years.

Some of the worst pain has been felt in coal-rich Queensland state, where Moranbah is located. Nearly 10,000 coal-mine workers have been laid off with many mines operating at a loss, according to the Queensland Resources Council.

The Queensland state government reported a A$650 million plunge in the year through June 2013 to A$2.1 billion in revenue from royalties, a set percentage from the sale of commodities demanded by the government for extracting the country's resources. State officials have deferred plans to ease payroll taxes and are looking to sell assets like toll roads, among other steps, to balance the books.

For Moranbah, a tiny town more than 600 miles north of Brisbane surrounded by cattle stations, low-lying scrub and gum trees, that is a bitter pill to swallow.

Coal mining is so ingrained here that the local newsstand sells postcards of coal trains and mining equipment—like dragline machines, which can haul hundreds of tons of waste rock in a single sweep—while the local child-care center uses a cartoon dump truck as its logo.

The town was established in 1969 to serve new mines in the region, like the Goonyella operation set up by Utah Development Co., which would be acquired by BHP Billiton BLT.LN +0.63% in 1984.

More mines opened, and Moranbah grew rapidly in the 1970s and 1980s, despite an inhospitable climate with temperatures of 104 degrees or above in the summer. Locals put down roots and took pride in their expanding community, winning multiple "Tidy Towns" awards from the Keep Australia Beautiful Council. A key moment: In 1982, residents established their first cemetery, which meant they no longer had to transport bodies elsewhere to be laid to rest.

After leveling off for a while in the 1990s, growth took off again in the 2000s, when Asian demand for coal spiked and prices surged.

A McDonald's MCD -0.57% opened and the area's population ballooned by more than 1,000 people a year, including temporary workers who would fly in for stretches at the mines.

At the Moranbah Community Workers Club, a bar and bistro with flat-screen TVs and designer chairs, proprietors borrowed to finance a A$5 million dollar renovation in 2012 and 2013 that included a new A$100,000 keg room. Housing prices went through the roof as local mines worked around the clock.

"We thought: Finally, you know, we are all going to get somewhere," said Leanne Ellis, who runs Café 17 and has lived in the town for 26 years.

Then, almost as quickly as it began, the boom stopped.

The BMA joint venture of BHP and Mitsubishi Corp., the area's largest employer, closed its nearby Norwich Park and Gregory mines in 2012, wiping out some 1,200 jobs. Now it is axing 230 more at its Saraji mine, half an hour's drive south of the town, though it said some positions could be relocated elsewhere.

The area's Peak Downs coal mine. Brian Cassey for The Wall Street Journal

In all, BMA has pared its workforce in the Bowen Basin—a series of mines for which Moranbah serves as a northern hub—to around 7,000 staff and contractors from more than 10,000.

Other companies including Arrow Energy, a joint venture of Royal Dutch Shell PLC and PetroChina Co. that operates a coal-seam-gas field nearby, have laid off staff. So, too, have many shop owners and other small businesses that rely on resources investment. Resources companies cut spending in the area to about A$1.6 billion in the year to June 2013, from around A$1.8 billion the previous year, according to the latest data collected by local industry.

The Isaac Regional Council, a government body that includes several towns in the area, said annual income from taxes and other revenues dropped to A$142.9 million in the last fiscal year, from A$147.6 million the year prior, and its cash holdings have fallen sharply. The council has cut the budget for infrastructure works and upped tax rates for homeowners.

Many residents have bailed out entirely. Moranbah's population fell to 12,865 from 13,575 in the last fiscal year, with declines likely to continue this year, authorities say. For the Moranbah Bulldogs, who play Australian Rules Football in a local league, it can be a struggle to field a team.

Homes valued around a million Australian dollars are now lucky to get a bite at half that price, according to Ms. Exposito, the real-estate agent. About 300 of the town's 4,000 privately owned houses are vacant, she says.

The town had boomed in the past decade amid high commodity prices, adding amenities like a public pool. Brian Cassey for The Wall Street Journal

Ms. Exposito, who grew up in northern Spain, says she loved the community feel of Moranbah and would hate to see it disappear. She landed in Moranbah in her 20s after moving to Australia and looking for a community that didn't have its own real-estate agency. She says now she spends part of her time consoling depressed residents. She has worries of her own: She owns 20 properties, five of which sit empty.

At Café 17 down the road, Mrs. Ellis says she only needs two staff a day now from five previously. Her husband, Michael, who will celebrate his 50th birthday this year, is among those who have lost their jobs in the mines. They are now debating whether to leave.

"My husband and I love Moranbah, it is our town," said Mrs. Ellis, who moved there at age 19 after growing up in a smaller community to the south. She recalls doing small things to make life better, including banding with merchants to convince the local council to pipe music through the Town Square retail strip. "We look out for each other," she said, as Aretha Franklin's "I Say A Little Prayer" streamed through the loudspeakers.

Local leaders have talked about new industries as diverse as tourism, defense and even algae production for biofuels, but few investors have expressed interest in a place so remote with such high costs.

At least Moranbah still has hundreds of years' worth of coal below the surface. Some of the world's older mining towns, including some in America's Appalachian states, face a bleaker future because their resources are drying up.

German migrants built stately homes, a casino and Africa's first tram after diamonds were discovered in 1908 in this part of the Namib desert. By the 1950s, discoveries dried up and the town was abandoned. Photo: A view from the town hospital. ZUMAPRESS.com

That gives leaders hope they may only need to get through a temporary period of pain, especially if China's economy stabilizes and its demand for imported coal outpaces new supply growth, as some experts believe could happen a few years from now.

Ashley Dowd, the 38-year-old manager of the Moranbah Community Workers Club, says it will take years to repay debts after his bar's recent renovation. He receives job applications from residents laid off by local miners but says he is usually not able to provide much work, having cut his own staff to 15 from 20 as fewer townsfolk stop by to indulge in Jack Daniel's-soaked pork ribs.

"It will be batten-down-the-hatches and try and ride through this period the best we can," Mr. Dowd said.

—Paul Kiernan contributed to this article.

Read more: http://online.wsj.com/news/article_email/an-australian-boom-town-feels-chill-of-commodity-price-decline-1402281061-lMyQjAxMTA0MDAwOTEwNDkyWj
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hoofarted
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Ms. Exposito, who grew up in northern Spain, says she loved the community feel of Moranbah and would hate to see it disappear. She landed in Moranbah in her 20s after moving to Australia and looking for a community that didn't have its own real-estate agency. She says now she spends part of her time consoling depressed residents. She has worries of her own: She owns 20 properties, five of which sit empty.


Too funny.
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Pauk
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peter fraser
28 Oct 2013, 07:24 AM
Moranbah is a very tough rental market at the moment with rents down under 50% of the peak, but I'm told that there are 3 new mines being developed. It will be back although I'm not a mining town investor - too volatile for my liking.

Some of those other places like Peregian and Noosa look very attractive buying though.
lol Peter, because people are still selling below what they paid for their properties?
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stinkbug
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FUCK - IT'S A 40% PROPERTY CRASH!!!
---------------------------------------------------------------

While it's true that those who win never quit, and those who quit never win, those who never win and never quit are idiots.

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roberto
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True. Let's just hope it stays confined to a few mining towns and coastal tourist spots.
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herbie
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roberto
10 Jun 2014, 09:29 PM
True. Let's just hope it stays confined to a few mining towns and coastal tourist spots.
For the sake of the economy and the people generally, Yes.

Though I reckon even a bull would see it as a buying opportunity - Any who weren't bankrupt! LOL
A Professional Demographer to an amateur demographer: "negative natural increase will never outweigh the positive net migration"
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