THE CARNIVAL IS OVER
HOUSE PRICES IN MINING TOWNS NOW THE BOOM IS GONE
OWNING A HOUSE IN
A MINING TOWN IS A
FUTURES PLAY ON THE
COMMODITY MARKET,
EXAGGERATED WITH
LOCAL RISK FACTORS.
When commodity prices halve, as they
have done in 2014, mines will shutter
down, and houses, once in heavy
demand, can lie empty. Even if demand
is solid, the value can be eroded in other
ways. Developers, lured by high prices,
will develop new supply that can reduce
rents. Mining companies can decide to
build their own accommodation, and/or
adopt FIFO policies, if that is cheaper than
renting accommodation. So a house in a
mining town is a high risk play over factors
well beyond the control of the freeholder,
in a small and volatile market. It begs
the question why anyone would take
the risk, and indeed, there are enough
stories of unsophisticated buyers lured by
the promise of positive gearing, without
understanding the market risk that they
are buying into.
There are 21 significant mining towns
in WA, QLD and NSW. They contain
almost 63,000 houses between them.
In aggregate they are about equal to the
stock of houses in Hobart, and comprise
just 1.6% of all house stock in Australia.
45,000 of these mining town houses are
in QLD.
1
Some towns, like Mackay, Port Hedland
Price change last year
and Broome, service a range of
2%
industries besides mining,
including
Number
of sales
6%
tourism
3500 and agriculture, benefiting from
1%
Blackwater
QLD
diversification. Kalgoorlie is best known
-1%
as a gold town. It too has suffered
Moranbah QLD
3000
price
reductions (-11% in 2013, -6% in
-11%
2014) but the gold price is rising again
Karratha WA -12%
in A$ terms and will soon recover.
2500
Others are strictly one industry towns. Like
the ghost towns of old from the days of the
gold
rush, they boom while there is money
2000
to be made, and then disappear. Investors
have been attracted to a number of these
towns
1500like Emerald, Moranbah, Karratha
and Port Hedland, during the period when
the mining workforce was flooding in and
demand
1000 seemed insatiable.
NATIONAL REGIONAL
NSW REGIONAL
WA REGIONAL
QLD REGIONAL
MT ISA QLD
GLADSTONE QLD
Emerald QLD-13%
-14%
Muswellbrook
-15%
NSW
-15%
MUSWELLBROOK NSW
SINGLETON NSW
MILES QLD
PORT HEADLAND WA
-16%
CLONCURRY QLD
-16%
EMERALD QLD
-26%
KARRATHA WA
-29%
DERBY WA
-37%
MORANBAH QLD
-38%
BLACKWATER QLD
The house price boom came to an abrupt
end in 2013 and the last two years have
500
seen drastic price falls in the worst
over the next five years, further reducing
affected towns. The worst affected towns
employment demand in the mining sector.
have the
The mining industry is in a transition
0 equivalent of three to five years’
worth of stock
the2010
market
for 2012
sale and
phase from capital expenditure on
2008 on
2009
2011
2013 2014
it is a buyers’ market.
infrastructure to the production phase,
which means different skilled workers are
BIS Shrapnel state that expenditure on
required and overall, less FTE.
mining and heavy industry construction
is only now peaking and will fall by 30%
70
60
$ Bn in constant dollars
Buying a house in a mining town is not so
much a real estate decision, as a futures
play on the global commodities market.
Value depends on rent, which depends on
accommodation demand for employees
working on a resource project.
50
40
Mining & Heavy Industry Construction
Oil and gas
Bauxite, alumina and aluminium
Coal
Minerals and iron ore
Other heavy industry
30
20
10
0
2007
2008
Propell National Valuers - Property intelligence for today and tomorrow
2009
2010
2011
2012
2013
2014
2015
2016
2017
Source: BIS Shrapnel
March 2015
PORT HEDLAND: CAUSE TO WORRY?
Some sensational headlines have hit the
news. In one example: “SQM Research
managing director Louis Christopher
said Port Hedland, a mining town in the
Pilbara region exposed to iron ore and
gas, has experienced a “40% plummet”
in asking prices – with houses down
from $1,500,000 to $900,000…”
SUFFERING: THE LAW OF GRAVITY
Gladstone is the largest, with 8,900
houses. It is the port city for the Bowen
Basin, within which are also Emerald,
Moranbah and Blackwater. Together,
these towns have been the worst affected.
For these six towns, the number of
house sales has dropped by half. There
were almost 3,000 sales in 2011, as
optimism about mine expansion and
the dredging of the harbour to provide
new port facilities reached its height.
Three years later in 2014 saw 1,225
sales, as mine expansion plans were
reversed, environmental concerns
dogged the harbour dredging,
and commodity prices fell.
Price increases of 10% p.a., 20% p.a.
or more have been replaced by falls in
the past two years of up to 38% p.a.
Blackwater QLD
Moranbah QLD
3000
Karratha WA
Emerald QLD
2500
BLACKWATER HAD 181
HOUSES SELL IN 2011,
FALLING TO JUST 18
IN 2014.
Muswellbrook made the list as the most
affected in NSW with a fall of 13% in 2014
that seems almost modest in comparison.
Karratha, at the hub of WA expansion,
and with almost 3,400 houses, has seen
turnover fall some 45% with prices down
-12% in 2013 followed by -26% in 2014.
MORANBAH HAD 260
HOUSES SELL IN 2011.
THIS DROPPED TO 43
IN 2014.
Muswellbrook NSW
Gladstone QLD
2000
1500
1000
0
Propell National Valuers - Property intelligence for today and tomorrow
Source http://goo.gl/YSQvpN
IT’S A BUYERS’ MARKET
2008 2009 2010 2011 2012 2013 2014
Price change p.a.
+30%
Gladstone QLD
Muswellbrook
Mining & Heavy Industry
Construction
+20%
70
NSW
Emerald QLD
Oil and gas
Bauxite, alumina and aluminium Karratha WA
Coal
Moranbah QLD
Minerals and iron ore
Other heavy industry
Blackwater QLD
60
+10%
50
40
+0%
30
20
-10%
10
-20%
0
2007
2008 2009 2010
2011
2012 2013 2014 2015 2016 2017
Source: BIS Shrapnel
2
Port Hedland is a small market with
just 870 houses and, of all the mining
towns it has the highest median price of
$932,500. At the time of writing there
are 77 houses on the market for sale.
Only 28 sold in the last year, so prices
will continue to slide for some time.
500
$ Bn in constant dollars
Blackwater, Moranbah, Karratha,
Emerald, Muswellbrook, Gladstone:
these six towns have been most affected
by the mining boom and bust, with
falling prices, though the immediate
cause varies from town to town.
Number of sales
3500
Local agents denied a “40% plummet”
and our analysis of sales back them up.
Some expensive houses may indeed
have shown a large fall, but in terms of
median prices, Port Hedland prices fell
-15% in 2013 and -15% again in 2014,
which is still close to -30% over 2 years.
BLACKWATER IS THE
LEAST POPULAR
MINING TOWN FOR
BUYERS WITH ONLY
12 SALES LAST YEAR
DESPITE 200 HOUSES
BEING ON THE MARKET.
Muswellbrook NSW is a much larger
market than Port Hedland, with
4,900 houses. Prices have fallen
-13% in the past year but seem
destined to weaken further.
-30%
An account by a local resident is:
-40%
“It’s the worst I’ve seen it in 28 years in
the mining industry,” says Mr Windle.
2008 2009 2010 2011 2012 2013 2014
March 2015
3
“Everyone is getting out. 300 houses are
for sale in my town, 3 in my street, and
rental prices have collapsed on older
weatherboard houses from A$1,000 a
week to A$200,” he says.
Newcastle prices were up 3% last year.
Its role as a port city for the mining
towns has less impact as the city has
diversified and become an acceptable
residential alternative to Sydney, with an
improving Central Coast location. Maitland
has seen a lot of new residential stock
(subdivisions, house/land packages) and
is relatively affordable.
Source http://goo.gl/6e3Jmh
LISTED FOR
SALE
NUMBER SOLD
MONTHS TO
CLEAR MARKET
Blackwater QLD
200
12
200
Miles QLD
76
17
54
Moranbah QLD
166
38
52
Derby WA
83
22
45
Chinchilla QLD
212
58
44
TOWN
Cloncurry QLD
92
26
42
Emerald QLD
369
107
41
Dalby QLD
416
129
39
Mt Isa QLD
178
59
36
Roma QLD
341
121
34
Muswellbrook NSW
303
111
33
Singleton NSW
158
58
33
Port Hedland WA
77
28
33
Kalgoorlie WA
327
145
27
Mackay QLD
55
23
29
Karratha WA
327
145
27
Geraldton WA
106
47
27
Gladstone QLD
648
317
25
Broome WA
63
30
25
Townsville QLD
859
499
21
Narrabri NSW
148
113
16
Figures are for the last twelve months
Time to clear market is in months
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March 2015
Townsville
Cloncurry
55
23
166
38
Moranbah
369
107
Emerald
Mackay
200
12
648
317
Blackwater
Gladstone
341
121
76
17
Miles
Roma
212
58
Chinchilla
416
129
Narrabri
158
58
$260,000
Mt Isa
Cloncurry
-11%
303
111
Muswellbrook
Singleton
1%
Townsville
-16%
$240,000
$400,000
Moranbah
Mackay
-37%
$362,500
-16%
Emerald
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March 2015
$210,000
-38%
$359,000
Blackwater
-12%
$330,000
$320,000 -15%
-3%
Miles
Roma
$355,000
-7%
Chinchilla
$282,250
-1%
Dalby
$300,000
-6%
Number of listings
Number sold last year
4
1%
Gladstone
SOUTH AUSTRALIA
148
113
NEW SOUTH
WALES
SOUTH AUSTRALIA
Dalby
$340,000
NEW SOUTH
WALES
92
26
$332,000
QUEENSLAND
Mt Isa
859
499
NORTHERN TERRITORY
178
59
QUEENSLAND
NORTHERN TERRITORY
Mining towns - NSW/QLD
Narrabri
$290,000
$325,000 -13%
-14%
Muswellbrook
Singleton
Median Price
Price change last year
5
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March 2015
Mining towns - WA
83
22
-29%
Derby
$580,000
106
47
Geraldton
108
44
Kalgoorlie
-26%
-15%
Port Hedland
Karratha
$340,000
-2%
Geraldton
$286,000
-6%
Kalgoorlie
Number of listings
Number sold last year
6
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March 2015
NORTHERN TERRITORY
WESTERN AUSTRALIA
Karratha
$503,000
SOUTH AUSTRALIA
Port Hedland
$932,500
WESTERN AUSTRALIA
77
28
Broome
NORTHERN TERRITORY
327
145
Derby
-1%
Broome
SOUTH AUSTRALIA
63
30
$375,000
Median Price
Price change last year
7
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March 2015
Major Queensland coal
basins with CSG potential
Galilee
Basin
Bowen
Basin
INVESTING? Stay near the coast, avoid the north-west
Plenty of red ink, but there are positives
too. Kalgoorlie has a positive outlook
driven by a revival in gold mining, while
Geraldton is well diversified, benefiting
from agriculture and the low median
price makes its proximity to Perth
attractive as an alternative place to live.
Gladstone is the port city poised to
benefit from state government plans to
expand thermal coal production in the
Galilee Basin, which would also benefit
Moranbah, Emerald and Blackwater, the
three towns that have suffered most. The
benefit may only be for the medium term
though: the targeted customer for thermal
coal is India, and it has announced a
fivefold increase in renewable energy
This highlights the risk of investing
in houses in small mining towns
that are dependent on one industry,
or worse, one customer.
In Queensland, the best prospects
are for larger coastal towns that
have exposure to tourism and
agriculture, in addition to mining.
In Western Australia, the north-west
towns are looking very expensive, with
Broome and Karratha likely to be the
first to find a new base price level.
MEDIAN PRICES
TOWN
Blackwater QLD
Miles QLD
Moranbah QLD
Derby WA
Chinchilla QLD
Cloncurry QLD
Emerald QLD
Dalby QLD
Mt Isa QLD
Roma QLD
Muswellbrook NSW
Singleton NSW
Port Hedland WA
Kalgoorlie WA
Mackay QLD
Karratha WA
Geraldton WA
Gladstone QLD
Broome WA
Townsville QLD
Narrabri NSW
2007
Peak
2014
$261,000
$181,000
$365,000
$367,000
$229,000
$244,000
$369,000
$221,000
$315,000
$260,000
$251,000
$327,000
$515,000
$307,000
$401,000
$643,000
$361,000
$356,000
$726,000
$374,000
$193,000
$455,000
$364,000
$744,000
$567,000
$370,000
$247,000
$459,000
$273,000
$385,000
$338,000
$323,000
$422,000
$922,000
$370,000
$439,000
$810,000
$396,000
$475,000
$726,000
$390,000
$279,000
$290,000
$345,000
$400,000
$406,000
$342,000
$238,000
$361,000
$250,000
$353,000
$305,000
$304,000
$383,000
$756,000
$359,000
$395,000
$540,000
$375,000
$398,000
$603,000
$372,000
$240,000
RISK FACTORS
Change from Now compared Market Size
Peak
to 2007
No. of Houses
-36%
11%
Small
-5%
91%
Small
-46%
10%
Small
-28%
11%
Small
-8%
49%
Small
-4%
-2%
Small
-21%
-2%
Medium
-8%
13%
Small
-8%
12%
Medium
-10%
17%
Small
-6%
21%
Medium
-9%
17%
Medium
-18%
47%
Medium
-3%
17%
Medium
-10%
-1%
Large
-33%
-16%
Medium
-5%
4%
Medium
-16%
12%
Large
-17%
-17%
Small
-5%
-1%
Large
-14%
24%
Small
Surat
Basin
Clarence
Moreton
Basin
Named basins have current exploration
BUYING A HOUSE
IN EMERALD?
YOU HAD BETTER
RESEARCH RENEWABLE
ENERGY POLICY IN
INDIA FIRST.
2013
-21%
-1%
-38%
-1%
0%
11%
-8%
5%
7%
-1%
-1%
-4%
0%
2%
-2%
-12%
-1%
-7%
2%
2%
17%
PRICE CHANGES ACTUAL/PROJECTED
Projected Median Term
2014
2015
Outlook

-19%
-15%

-5%
-10%

-13%
-8%

-25%
-15%

-8%
-15%

-4%
-5%

-14%
-12%

-8%
-8%

-8%
-5%

-9%
-1%

-5%
-5%

-6%
-5%

-18%
-20%

-3%
5%

-9%
0%

-23%
-10%

1%
0%

-10%
0%

-11%
-5%

0%
0%

-14%
-15%
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8
Cooper
Basin
installations, along with higher taxes
on coal, with a target to reduce and
possibly cease all imports of thermal
coal over the next two or three years.
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Standards Legislation.
This information is provided in good faith and on the assumption
that data sources are accurate. It is general information only and not
a comprehensive analysis and should not be relied on as such. Any
reproduction of the contents should acknowledge Propell National
Valuers as the source. Neither Propell National Valuers nor any
person involved in the production of this report accepts any liability
for its contents. Forecasts and commentary are based on a set of
assumptions which may change.
March 2015