Mining town rental vacancies rising

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By Leith van Onselen

From SQM Research comes news that rental vacancy rates remained broadly steady in March across the capital cities but have increased slightly over the year:

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SQM notes that rental vacancies in Canberra have risen strongly since July 2012, which may be associated with the large increase in apartment developments, together with federal government attempts to reduce the budget deficit (see my earlier post on Canberra).

There has also been a notable increase in vacancy rates across Australia’s key mining regions, most notably:

  • Gladstone (QLD): 5.6%
  • Karratha (WA): 3.7%
  • Kalgoorlie (WA): 1.9%
  • Roma (QLD): 2.6%
  • Port Hedland (WA): 4.6%

According to SQM Research’s Managing Director, Louis Christopher:

“We are now watching the data very closely on the various mining towns in the country. Property investors over the past ten years have done extraordinarily well if they held real estate in mining towns. However, there is always a risk that when a down turn arrives that these markets could have a very rapid and severe correction. We remind investors to remain very cautious when it comes to these towns.”

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Comments

  1. Very good advice.

    Currently in Darwin prices seem to have stalled for houses for sale and there is a lot more apartment stock coming onto the market.

    There is an exodus out of the NT due to the high cost of living. The promised wealth bonanza of the mining boom has not trickled down to the average person and the government job freeze isn’t inspiring confidence. Greedy land lord syndrome isn’t helping either. This one is a lease break going from $670 up to $780.
    http://www.realestate.com.au/property-apartment-nt-stuart+park-405782686

    However, Darwin has been seriously under built for the last ten years, so we still have a lot of catching up to do.

    Karratha surprises me, anybody know whats happening there?

    • Mining BoganMEMBER

      Karratha. If Rio work the same as BHP I would suggest that they are encouraging locals to go FIFO. I know a lot of long term Port Hedland residents who have gone FIFO in the last couple of years with a little push from the company.

      • I’ve heard recently that LNG are no longer hiring locals here at Gladstone – what work there is is going to FIFO’s.

        • The ultimate act of microeconomic parasitism – a company decends on a small regional city, plugs it’s feeding tubes into local infrastructure, the jobs all go to FIFO, the money flies away without ever passing though the local economy (pubs and brothels excepted), rent and property prices are driven through the roof driving signficant numbers out of their hometown, then they eventually pack up and piss off.

          Yes sir, the LNG boom has been great for Gladstone!

    • Hey bubbley,

      What is it about Karratha that surprises you?
      There are currently close on 5000 new homes being built to meet the projected population growth. Supply/demand equation is being balanced. Irrespective, current investment yields of 11% will probably go to 9%. We have recently built our first house in Karratha – rents can drop by 50% and we will still be +ve cash flow. Tell me where that can happen anywhere else in Australia?

      Whilst I love fishing and a great wage, it’s not why we built there. Buying/building our first home back home (Melbourne) seemed inanse at the time. Still does.

      • Last time I looked at Karratha was a few months ago. At that time rents were about $1200 for what looked like a kit home and there was not much land available.

        It looked like a shortage, which was why I was surprised that vacancies had increased to 3.7%

        So have they released a lot of land? or are there more FIFO’s with a reduced need to rent? or is there a reduced need for staff?

  2. My home town wins the “rising rental vacancy rate” competition!

    Everywhere I look around this town and surrounding areas (particularly Boyne Island/Tannum Sands and Caliope), residential land development has been going off like a frog in a sock. Exactly why we ever needed so much for a workforce that doesn’t live here and is largely housed in camps I’m not sure.

    I’m suspecting a re-run of Queensland Alumina Ltd boom outcome we had here in the 70’s – dollar dazzled investors diving in, squeezing local people with big rental and property price hikes….and then left holding a bag of shit when it ended.

    Such is life. Maybe my son will be able to afford to move out of home and even buy his own place after all.

    • “Boomtown blues just fade to grey
      and all that’s left are debts, he cried..”
      – Gladstone Pier, John Schumann 1984

      • Yup, got the album.

        FIFO has changed the boomtown dynamic. There were plenty of problems in the past with rental and housing cost hikes (though seemingly not to the extent of today) etc but the difference was that the workers actually lived here for however many years the run of projects took. They spent their wages here and the money flowed through the local economy. Now, most of the money simply flies away without ever passing through the local economy. It’s hard to be certain that even much of the rental money makes it’s way into local spending – investors from other places have acquired so much Gladstone real estate that much of that money is likely drained away by absentee landlords.

        The benfits received by Gladstone from all this have been minimal at best, at have been outweighed by a slew of social problems. I have a feeling that when this is all finished, we will be left with something of a ghost town.

  3. innocent bystander

    “Mining town rental vacancies rising”

    had my hopes up there for a moment – always think of Perth as a mining town.
    Perth is suffering from the haves and have-nots. These mining booms sure do dislocate society. My heart goes out to the locals in Port Hedland etc Surely govt policy could have been better?