Quoted by one of the countries most renowned demographers,
Bernard Salt, as “the fastest growing municipality on the Australian Continent”
The Isaac region and its hub of Moranbah is certainly going through some
growing pains. But what does it all equate to?
2011 was a year that produced some of the best results for
property investors in the country. The median sales price rose over 30% and
rents sky rocketed to record levels, providing investors with 17% rental yields
at purchase price.
With the FTE population set to double, why has this thriving
hub come to a grinding halt? It should be no surprise to anyone who is actively
looking to invest in the Bowen basin that the BMA (BHP & Mitsubishi
Alliance) union led strikes are causing havoc throughout the region. The recent
closure of Norwich Park mine just down the road in Dysart sent shockwaves
through the property investing community. BMA claim the mine was running at a
loss and the union disputes was what tipped them over the edge of the cliff.
As Terry Ryder pointed out, watch what they do, not what
they say. Is it convenient that the tail of the Minerals & Resources Rent
Tax is being discussed and BHP is a key player in the negotiations with the
Labor Government on this tax? The closure of a mine puts them in the box seat
when they are arguing there point against taxes, not to mention union
involvement within their mining operations.
Close eyes need to be kept on Dysart and local insight and
networks are vital to ride the wave successfully into the future. None the
less, some great opportunities will be had in the long term future.
But the union disputes don’t stop in Dysart, the shockwaves
have reverberated to its neighbourhood hub of Moranbah. The housing market has
come to a standstill as new leases aren’t being signed by key players including
BMA, and in fact, people are vacating as there employment contracts aren’t
being renewed by BMA.
The lay person would put this down to the fact that BMA
simply refused to pay the rents landlords were asking. Allow me to clarify one
thing here using an example of one of my clients who owns a house in Moranbah.
With a quality, low maintenance tenant in his property in July 2011 he was
achieving $900 per week in rent. He anticipated that upon a lease renewal in
January 2012 he may receive above $1000 per week. Renting direct through the a
contracting company, he contacted the housing manager to ask their opinion on
the matter. In one phone call, the company offered an increase of $300 per
week. However when the lease came up for renewal in January, it was time to
formalise the increase to reflect market value. The company immediately offered
$1900 without even being asked by the landlord.
I tell this story to illustrate that it was not the
landlords who demanded such increases in rents, it was the companies offering
it as they are completely aware of the demand for housing and their reliance
upon it both now and in the future. The thought that Moranbah’s housing market
has slowed down at present is actually, completely un-related to the prices
they were paying for rent. It has to do with a political standoff between BMA,
the Unions and the Government. The fact that Moranbah’s housing market has
retracted, is nothing less than a by-product of an 18 month old bitter dispute
with the unions.
What does this mean for Moranbah’s future. To get a true
understanding of it, I believe it is important to look at 2 things:
1. The current change of local government
which has seen the Isaac region become one of the last Labor Strongholds of
QLD.
2. What items are already agreed upon in
the currently negotiated EBA’s (Enterprise Bargaining Agreements).
The new local government are anti-mining camps that will
impact the township and its service providers who were originally there to
service the full time residents, not a fly-in-fly-out workforce. The new council
are pushing strongly for more family housing to be built to grow the community
for the long term. The newly elected LNP government has since handed back
decision making power to local councils that hastily became powerless to the
ULDA (Urban Land Development Authority) who were appointed to take over
development control in certain regional councils throughout Qld.
When looking at some agreed points in the EBA, there’s some
positive news for property investors. Firstly, miners were against being housed
in 30+ year old houses were there standard of living was decreased
significantly to that of the city life. They are demanding a higher standard of
accommodation from their employers, which both parties are agreeable to.
As a result, an amount of $2000 has remained as a weekly
contribution to the employees rent. This in itself is a true indicator of where
Moranbah’s rental market will inevitably end after nearly two years of bitter
disputes between one of the country’s largest mining companies and the CFMEU.
With an increased demand for high quality accommodation
around the $2000 range, it leaves the older houses to be used to service
sectors that simply cannot pay such high rents. Industries such as health
services, construction, retail and small professional services will once again
be able to thrive, and help Moranbah continue to become the hub that it was
designed to be.
The next five years is planned to see more expansion
projects and new mines under construction within a 50km radius of Moranbah than
any other time in history. Over 5000 full time employees need to find accommodation
as nearly $13 billion dollars of private Capital Expenditure comes to fruition.
Could now be a prudent time for sophisticated investors to
enter the market, and take advantage of weaker market conditions in preparation
for the potentially prosperous years ahead?
