apples with apples and oranges with oranges

I want to take this opportunity to respond to what appears to be the view of some investors and advisors when it comes to investing in regional areas that have a large economic reliance on the mining industry. I want to address the view that having the foresight to look outside the box and evaluate trends and shifting demographics makes one a “speculator”.

I have been prompted by reading many peoples posts, blogs and general advice to do this. I was having a discussion with a large developer in Noosa Heads only yesterday, and he laughed at the idea of investing in regional QLD. A direct quote from him which I encounter all the time is “what happen when the mine closes or lays people off?”. Is it ironic that I was having this conversation with a developer developing in Noosa? One of Australia’s worst performing markets in the past few years. In case you are wondering, I did not miss the “s” on the end of “mine”. It is quite a common view that there are just one or two mines driving this and our past “mining boom”. Call me arrogant if you wish, but when people give me their opinion on regional markets without ever doing any research or even having visited the topical area, I simply do not have the time in my day to listen. Why, Well I am that busy dealing with businesses and investments in these areas that I just don’t have time to listen to naysayers without any factual grounds to their argument.

I also would like pose the question; to what level do people accept responsibility for their “predictions” or “speculations”? I recently had two potential clients conduct their own due diligence on investing in regional QLD. One came back and said “my mortgage broker said I couldn’t get the finance as I wouldn’t get $600 per week rent, he thinks it would be more like $400 per week” Since this buyer received this advice, the capital value of the property he was looking at has increased by $20,000 in just 8 weeks. This is judged on direct comparative sales. Not to mention that the rent was guaranteed by a secure lease. The other situation was a prospective client had a Melbourne property advisor (don’t ask me what qualifications you need to be have that role) assess what they were looking at.  The response was… “I don’t see any economic drivers to increase capital value unless something happened in the mining sector” & “this is what my realestate.com.au and bismark search showed”. Realestate.com.au whilst conducting a professional due-diligence! Are you serious!  Whilst this “advisor” is living under a rock, there are people out there pro-actively seeking opportunities to provide security and wealth for their family both now and in the future, and you’re advising them on an area that you have never been to, so you base your research on realestate.com.au!

I have many problems with what I am going to label, uneducated views. Firstly, is that if you are not educated about an area in full, don’t pass a “comment” as “advice”. Whilst I, in all honesty, wouldn’t know much about the Sydney or Adelaide property markets for instance, I would not comment on them, let alone provide “advice” on them. Even with access to RPDATA (a bit up from realestate.com.au) you must understand that the information provided should be taken in full context. Not on its own. If you understand a local market, than you will most likely make sense of data and statistics available to you. However, if you don’t, than it is almost guaranteed that you will misconstrue the information you are looking at. This is fine if it is how you are going to handle your own investments, but surely not somebody else’s?

The view of these naysayers is that mining is not a secure industry to base a property investment on. However, it really isn’t as clear cut as this in reality. This statement is neither true nor false if you ask me. They teach that buying in or very close to a capital city is the best way to build a portfolio with good capital growth and security.

The idea that anyone who wishes to or does invest in a mining town is a “speculator” is actually quite offensive to me. For years I have been successfully investing in mining regions. Along with other people I know very well, we have all developed solid, long term, secure portfolios built on education, wisdom & professional due-diligence. I would in no manner, consider myself a speculator.

One view is that these areas are bad judgements for investment because it is majority investors who buy in mining towns. For my comparisons I am going to use Lane Cove in Sydney as my example, and to compare apples with apples I will use raw data from the 2006 census report and RP DATA.

In the 2006 census, in Lane cove NSW, 62.6% of properties were owner occupied. In Emerald, Central QLD, 56.2% of properties were owner occupied. Only 6.4 basis points difference in the owner occupied V investment property ratios. Whilst I agree that investing in regional areas minimises your exposure to an array of industries to drive employment, does this always directly relate to minimised capital growth? Of course it doesn’t. What drives capital growth is supply and demand along with increasing disposable income so the population can afford to spend more on accommodation. Does this minimised exposure to industries also mean a higher level of volatility? To answer this effectively, you cannot put apples in the same bag as oranges. There are many different regional areas and all need to be assessed on their own merits/pit falls as does any other area in Australia.

By using the census in 2006 to find the ratio of owner occupiers to Investors in a town, many in regional QLD are around the 50:50 ranges. 5 years have since passed so I am sure that the new census result next year will shine a new light on everything, we would be silly to assuming that the Australian economic landscape has not changed in the last 5 years. So let’s assume that in some areas the investor ratios is a little bit higher. Let’s ask why this is? Does it mean that investors are “speculative” and trying to get in on a boom? I don’t believe so. With a little bit of education, you will find that the average lifespan of a mining employee remaining with one company is 2.5 years. This is due to the fact that there are more than 2 mines currently operating in Australia contrary to popular belief. There is a severe skilled labour shortage in the mining sector and has been for some time. This is poised to get worse as time goes on. These employees generally stay in the mining industry, they are, in most cases, poached and offered better pay. Thus increasing the amount of times they move house, whilst at the same time, increasing their pay. This is the reason why you may find many investors active in a niche market where there are sometimes reduced owner occupier ratios. It does not mean that accommodation demands are in any way short lived, it purely means that the person living there may not be there forever as they have other opportunities presented to them. As part of any due-diligence that I do, I assess this as good thing, it means that the average wage of owner occupiers and my tenants are increasing, thus increasing potential rents and capital value.

Secondly, to say that “our mining towns” were fled by investors is a most uneducated point of view. As I mentioned earlier, we need to ensure that we are not comparing apples with oranges. There are, the odd towns in QLD let’s say, where a town has been impacted by just one mine. This has meant that the property market in that particular town has become very volatile. I will use Capella for example; it is only 30 minutes north of Emerald QLD. The small coal mine that was operating there decided to hold all operations in the wake of the GFC. This caused detrimental effects on investors as their houses were left empty at the end of their tenancies. Prices plummeted and investors were affected. However it would only take a 5 minute google search to assess the volatility of this “one mine” town compared to others. Production has resumed and houses are in demand again in this town. However, I personally wouldn’t invest there due to the volatility. 30 minutes away is Emerald, heavily reliant on the mining industry for its buoyant property market, accentuated by a very strong agricultural industry in the region. Prices in this town did not fall, the median sales price did as units and smaller houses became more popular. Rents were not impacted (if at all, only by 5%) and investors had no need to rush out and sell as they nearly all had the benefits of a positively geared property that was still in demand by tenants. This is because the town is supported by not just one mine, but numerous mines owned by some of the world largest companies. Not only is it supported by the mines directly, but by its underlying infrastructure of companies that contract to and outsource to the mines all throughout the Bowen Basin. As a so called “speculator” my investments were very, very good in the good economic times, and still good when everything apparently went bad in the world. Pretty good “speculation” on my behalf I believe! In fact, as many of you would consider me to be young, I am happy to say that I made more money in the GFC than any other 18 month period to that date. Here’s some good reading by Terry Ryder to re-iterate my opinion http://www.theaustralian.com.au/news/executive-lifestyle/lets-not-leave-out-the-good-bits/story-fn6njxlr-1226113942257 .

To assume that everyone wants to live within a short drive of a capital city is a far cry from reality. Believe it or not, there is a large amount of our 23 million population that actually enjoy living outside of the city and also in rural/regional areas. In fact this trend is becoming more popular as urban and regional sprawling occurs, not to mention or population projects of 40m people by 2050.  Governments are spending a lot of money to provide infrastructure to many regional areas including government offices as living in a regional city/town becomes quite often a more financially viable option. Not to mention that there are lifestyle opportunities to be had which are completely different to that of the city life. People enjoy these areas and establish their families in these regions. I particularly like this video by key demographer Bernard Salt on regional areas http://video.theaustralian.com.au/1987201416/Regional-towns-are-Australias-muscle .

Fly in and Fly out miners are becoming more and more popular and let me tell you why, because if there’s not enough housing near a mine, you have to fly them in and out. I challenge you to drive around regional QLD and find enough vacant houses in one area to support an entire mine site. Mines actually prefer to have their staff living local. In Emerald, some mining companies pay incentives if you buy a house and sign a 5 year contract. The reason the companies are asking to have higher fly in fly out ratios is because a little bit of foresight will show you that we have only just seen the beginning of this mining boom and they have to make preparations for the very near future to man a mine site properly when there are already 0 – 0.5% vacancy rates in all mining towns.

In regards to mining, it is here for your generation, and the generations to come. I want to put it into perspective for you, In Gina Reinhardt’s mine in Alpha, whilst they have only explored in depth a portion of their tenement, they have discovered enough coal to supply our current export demand for the next 150 years. This is one part of just one tenement in one basin in QLD.

In every major town throughout QLD, some major retail companies are investing billions of dollars in retail. In Mackay, there are new Woolworth’s shopping centres opening, the Canelands shopping centre in the CBD by Stock land is undergoing an extension to double its size including a new Myer store. A $120m development in Emerald is seeing a second Woolworths, a 2 hectare big W store and 40 other specialty shops. Townsville is undergoing massive retail development with Myers also. These key regions have been turned from country towns to thriving regional centres over the past 10 years. And now, we are seeing them change into mini cities with diverse economic impacts including mining which is only getting stronger as we see some of the largest corporate investments take place in Australia’s history right in our own backyard. These companies are not spending nearly $400 billion dollars for an overnight investment.

If you are scared of what impact a mining “bust” may have on your portfolio should you be exposed, then you need to understand that our whole economy is exposed to our mining sector. The misconception that by being in a capital city you would be immune to such an incident is just pure ignorance I believe. I would suggest some in detail research in to our key mining companies, where there employees are, and what indirect jobs have been created throughout Australia as a result of the mining industry. If you don’t want your property to be exposed to the potential impacts of something dramatically happening to our mining industry then sell your house now. And for those wondering why I didn’t ask where your house is, it’s because it doesn’t matter. There will be severe consequences for many people throughout our country if our mining industries bailed.

I am not saying that buying in any mining town will be a good investment; any person can clearly identify the risks involved in “speculating”. However I think it is important that people begin to compare apples with apples and oranges with oranges.

Whatever you do, do your own research, don’t let someone tell you that something won’t be a good investment or even that it will be. Come to the conclusion yourself, take in all the “opinions” you want and form your own due-diligence. There are many opportunities in all areas of this country for people, don’t ever let someone tell you what is good or not. I know that if I had listened to all the naysayers I would not be a successful businessman and property investor; in fact, I would still be at my high school desk waiting for the teacher to tell me I would actually do something worthwhile and successful. Lucky I didn’t listen when all the people told me I wouldn’t get anywhere. 

Gladstone update

It seems the Gladstone council and QLD State government have come to terms with the social and economic impact of the LNG boom and have accepted the fact that GLNG will house 48% of its total workforce in Gladstone itself, not on Curtis Island as originally planned. I would assume that other companies will follow suit here.

This advancement significantly reduces the risk that was apparent in the local property market with the initial EIS proposal for accommodation.

I thought I would update my findings for you all. I am in negotiations with a few builders here so I will let you know of my outcome to see what investment opportunities come up. Rents are going strong here. For a 4 x 2 x 2 house fully furnished you will achieve $1000 per week easily, with increases every 6 months! That's a good 10% return pretty much with some strong capital growth in the coming years. None the less, I still believe it is a market that should be watched closely should you decide to invest there.

Josh 

SURAT BASIN

Historically founded on rich, fertile farming land and extensive flood plains, the Surat Basin has significant reserves of Thermal Coal (used for creating electricity). From this, extensive commercially viable Coal Seam Gas deposits have recently been explored and now, began to efficiently be drilled and mined.

As we found in the Gladstone review it is clear that this level of mining activity in the LNG (liquefied Natural Gas) industry is unprecedented. In Australia, we have been drilling for gas for centuries and using it locally in, however this new wave of investment comes from record international prices being paid along with demand. This has made our Coal Seam Gas fields in Rural Queensland commercially viable to mine.

In the Surat Basin we find many regional centres:

1.       Roma

2.       Chinchilla

3.       Dalby

4.       Miles

5.       Wandoan

These are just a few notable towns when it comes to being positioned to potentially benefit from this mining activity. Situated around a number of Coal Seam Gas wells is Chinchilla. So far this year the Median sales price is $100,000 up from last year, this would be due to capital growth and a large amount of new home being built, however mainly due to capital growth. A major player in the CSG field development being GLNG project, they predict a peak workforce of 580 people for their well constructions which will be completed in 2014 where the workforce will drop to 200 for the same area. They also predict that due to skills shortages in areas like chinchilla and surrounds that the Fly in Fly out work force will be 90%. Now they may still choose to base themselves in residential properties however my view is once again that the construction workforce is significantly greater than the long term workforce which will cause massive inflationary pressures on the housing market, causing rents to go well along with capital growth, however I see a significant drop in these numbers once construction has finished. It is estimated to be approximately 90% reduction.

This is only one company out of the three CSG projects with financial decisions made, and one potentially very close, I think Chinchilla will go well in the coming years. A good 4 bed house and land package sits around $420,000. From my investigations, building with a few bathrooms (just like Gladstone) and furnishing is the way to go if you really want to maximise your return. My advice is to watch the market as I believe it is even more volatile than Gladstone was said to be (of which I have some news to update about later). Builders and marketing firms seem to be developing some of the estates and selling the house and lands themselves which is great, just make sure that street scape is developed & maintained if you choose to go down this track.

There are a lot of residential lots currently going through council to cater for this, it is expected that Chinchilla will see significantly higher levels of land available next year. However there is still a small level of coal mining activity in the area. Cameby downs mine, owned by Syntech resources have developed their first coal mine just north west of Chinchilla. First mass coal production for export is expected in 2013 once the Surat Basin Railway and the Wiggins Island Port expansion project in Gladstone are completed. It is expected that employees will rise from 100 to 600 for the expansion and long term contracts. Many of these people will reside in chinchilla.

Moving north is a small town of approximately 300 people called Wandoan. This to me is an area to watch over the coming 18 months as the Wandoan Group (an Xstrata company) are at an advanced stage of planning and hold significant deposits around the township. With potential output of approximately 20mtpa (million tonnes per annum). This once again will rely on the Surat Basin Railway construction as well as the Gladstone port expansion.

Most of the undeveloped land around Wandoan is crown land, with some parcel privately owned, I am told that land will be released next year maybe. In my enquiries to this town it seems almost impossible to get a builder, so any new build would have to be a transportable to be viable in my opinion. On that note, from a property investment point of view, if you purchased an older property you would need to furnish it (nothing fancy trust me!) to get approximately $200 per room. However, maintenance is going to be a real issue with this little town! None the less, I have identified this town similarly to Dysart in the northern end of the Bowen basin. An old 3 bedroom house will go for $330,000+. However do remember that Dysart has a more than just one mining company around it, whereas Wandoan will only have the 1 company. Quite a risk but the prospects I don’t think look to bad.

I haven't travelled to south to Roma as time restricts me at present and my focus is on the Bowen Basin region now.

Happy investing everyone!

The Gladstone LNG Boom!

The Gladstone LNG Boom!

A long read but well worth it!

What we are seeing right now in Gladstone is put simply a boom. That is, housing prices and jobs have gone from moderate levels to unprecedented, record levels in a 1 year period. For property this has caused what looks to be a 20 - 30% rise in the median land sale price from this time last year. I am using land as the example here because whilst land is going up the size of the houses being built seems to be coming down in order for house prices to be more affordable. So looking at the median house sales price right now can give the wrong impression I believe.

Of course, all of this is due to some of the world’s largest gas companies discovering commercially viable sources of Coal Seam Gas reserves throughout the Bowen & Surat Basins and securing export contracts to sell such large amounts. A lot of this demand comes as millions of people are continually being lifted out of poverty and seeing a change in their way of life, thus providing increased demand in energy needs. The CSG companies have developed, and what seems to be refined, ways of extracting large amounts of this gas from the reserves, to the surface, through pipelines that are hundreds of kilometres long to the industrial town of Gladstone where it goes straight over to Curtis & Fisherman Islands. Here they are building multi-billion dollar plants that reduce the gas in temperature and turn it to liquid which can then be stored and exported.

With any mining “boom” it is imperative that as investors we educate ourselves on the short term and long term demands of these companies. What do they require and how will they get it. After being in property for years now and successfully investing on the back of such companies it is my job to assess in full these companies and their intentions and how their demands will impact the property markets in Queensland in both the short term and long term.

The general consensus is that with a boom a bust must follow especially when it comes to mining. What I think is important to note is that this statement can be true, however it isn’t always true. This is why it so important to buy on facts not on hype. Quite often underneath a lot of hype can be some good facts, but also bad facts that get overlooked. I want to look at the opportunity of investing in Gladstone underneath all the hype and base my decisions on facts. In the past this has worked for me very well, so I am going to apply my methodology very similarly.

At a glance in the midst of the hype we see the following:

• -          A big 4 bank making a statement that they see higher growth in Gladstone in the coming years than Australia on average.
• -          A lot of investors talking about their increase in rental yield over the last twelve months.
• -          People buying off the plan with quoted rental of $500 and then achieving $600 once completed.
• -          No land left.
• -          A lot of local agent hype and excitement.
• -          The next Port Headland.
• -          $60 billion dollars of investment…what could go wrong!

In reality and digging deep we see the following:

• -          Land still available and local builders not selling all what they have secured and in fact having to settle and build spec homes on land that they had under “put and call”.
• -          3 fully approved CSG plant projects totalling $51billion dollars ($15b of that is USD)
• -          Expected approval from another large player (Arrow) due in the next 1 – 2 years as they conduct a full EIS.

The companies that are the underlying fundamental reasons for investing in property in Gladstone and their plans:

Unfortunately many people don’t do nearly enough research into this. People get too caught up in trying to find what property they should buy and how much rent they will get. They apply the property to their portfolio, not the area. This is regional investing mistake 101. We should be applying the area to our portfolio, not the property or the rent. One bad investment and our portfolio can potentially be severely damaged.

Here’s what I have found out about the companies investing this money…

THE CONSTRUCTION

Out of the three fully approved projects (both Government and Company funding approved) there will be 3 separate CSG train plants (the trains are the machines that convert the gas to LNG) each costing approximately $15b each to construct. Most of these plants have 2-3 trains with a construction timeline of approximately 4 years each and not being built simultaneously although there is a possibility of this being the case especially for the second and third trains. (see below timeline from GLNG (Gladstone Liquefied Natural Gas)

It is important to see that peak construction workforce is reached by the second year for a very short period of time. In the third year you see over a 60% reduction in the workforce with the remainder being diminished in the 4th year. Note the significant reduction in the construction workforce for the 2^nd and 3^rd trains. I would assume this would be due to experience gained from the construction of the first train along with potential economies of scale.

The companies that have begun are GLNG & QGC with APLNG expected to start once some final approvals come through for their pipeline by the end of 2011. GLNG is the only company to publish a detailed timeline like the one above that I could find. It is quite helpful when determining if you should invest in property in Gladstone and, if so, for how long. Given that 2 of the companies have begun and another one to begin this year, we can assume similar trends in the workforce population with one company a year behind.

Below is a graph that I have prepared assuming that each train at each plant is constructed at separate times. This is the current plan however some companies may construct or at least overlap the train constructions should the resources and labour be available. If this happened the construction workforce at any one time could peak a lot higher and also shorten the entire construction period and decrease the time that accommodation is needed. I have also charted the potential workforce population should Arrow Energy start construction in 2 years’ time. Please take this graph as a sample only. I have prepared it for my own purposes and you should conduct your own research into its accuracy. There are several variables that cannot be controlled.

Simultaneous: This is a predicted workforce situation should each approved plant build one train at a time simultaneously.

Split Construction: This is a predicted workforce situation where GLNG & QGC begin construction at the start of 2011 and APLNG begin at the end of 2011.

Arrow Energy: This is a predicted workforce for Arrow Energy should they begin in 2013. Note the workforce for arrow energy is said to be 3000 during construction.

All 4 projects: This is a predicted workforce at any one time when all 4 companies are constructing and continuing on their current timeframes. This is the most likely scenario out of the 4.

You may realise that the said number of workers for just one project is 5000 people; however the graph does not represent this. This is due to the fact that there is not a single time in the construction phase that GLNG has predicted that all workers will be deployed at the same time. There will be a total of 5000 workers for one project spread throughout the 4 year construction period of the train.

In conclusion of the above chart:

-          In 2012 there could be 7500 workers on Curtis Island

-          In 2013 there could be 6500 workers on Curtis Island

-          In 2014 there could be 3400 workers on Curtis Island

-          In 2015 there could be 2000 workers on Curtis Island

-          In 2016 there could be 4400 workers on Curtis Island – This is the peak future workforce expected to reach this level again in 2020

-          There are other smaller projects that will build smaller trains when commercially viable which are years away. This could add to the amount of people and reduce the fluctuations in workforce however from an investment perspective this is purely speculative at this stage.

-          Worst case scenario is the simultaneous construction. This would see greater fluctuations in the workforce.

CONSTRUCTION WORKFORCE ACCOMMODATION

Now that we have an idea of potentially how many workers will need accommodation at any one time, we can work out what demand this will put on the Gladstone housing market.

So where do the companies plan to put all of the workers? Well interestingly enough in the GLNG EIS they state that they will build a 2000 man camp on their site at Curtis Island. Each other company must provide relevant studies, and as a result, suitable commitments to the government and local councils to ensure that their projects do not severely impact the local rental and housing market. Many of you would be saying that it already has impacted the market and I agree, it most definitely has. However by digging a bit deeper the main company wanting houses in the Gladstone market is a company by the name of Bechtel. Bechtel have been awarded the contract to construct a lot of the infrastructure for the GLNG plant, including a 2000 man camp.

Pressure has been placed on this company to comply with the EIS of GLNG. They are in fact legally obliged to. Failure to do so can result in serious ramifications from the Government. The 2000 man camp will also house any employees of Bechtel once built. However it is likely that Bechtel will secure further contracts with other companies no doubt, again, where accommodation should be provided on site. Bechtel have secured a lot of accommodation in Gladstone and are paying top rents, for how long though we will have to find out, and in some of our cases, we will gamble on that question.

In May 2011 Bechtel were called to answer the Gladstone Regional Council as to why they were securing properties in the Gladstone Region as it was not a part of the EIS. Here they assured that the securing of the accommodation was for the up skilling of the local labour market. They also assured the council that they have capped the rent that they will pay. This is a continuing saga with locals as a widespread rumour of bidding for rentals is occurring from this company. Whether this stands to be true or not I am not sure. The outcome of this all will be quite interesting and will have a large impact on investment properties in the Gladstone Region.

What is alarming to me is the fact that a premium is being achieved for furnished accommodation. Such companies are only interested in renting furnished properties and they must be of a good standard (no more than 6 years old from what I can find out). Furnished accommodation has always been considered to cater to a non-committing client. In this case the company wants to put as many people in one house as possible (generally limited by the number of bathrooms). This tells us that the people/companies paying the high rents are for fly in fly out workforce. This was in fact not allowed under the guidelines of the EIS’s for all of these LNG plants.

Organic growth signs in a rental market would be families moving into homes and furnishing them themselves as they are moving to the region for the long term. This is happening however this is not what could potentially drive rents even further. In an unstable property market you would expect to see rents plateau around the 9 – 10 % ROI at current market value. We are seeing this with the furnished accommodation currently.  Should rents increase, you would imagine the price of the property will increase accordingly.

 Currently rents for a furnished house worth approximately $600,000 (including furniture etc.) would achieve between $800 - $1000 per week (a 9% return @ $1000pw). Should rents say, double, then you would expect the price of the property to potentially double, reaching a value of $1,200,000. We are being told that rents are capped at $300 per person they can put in the house. So for a 4 bedroom 4 bathroom house you may achieve $1200 per week rent. Making the property potentially worth just under $700,000. This is based on what we have seen in some areas of WA and QLD where the values of the houses are dictated by the rent that can be achieved.

What about the operational workforce:

The operation workforce predictions of the projects are between 15-20% of the construction workforce. Of which 60% are expected to be local and 40% fly in fly out.

This is clearly a significant drop in a workforce and is to be expected by such a project which is exactly why local and state governments will do everything they can to avoid a short term bubble that can burst overnight as this would be detrimental to the region leaving hundreds if not thousands of homes empty, or achieving significantly less rents than investors originally thought would be achieved. Not to mention any locals that buy in the midst of a boom and find there house worth significantly less in the years to come. I am not saying that this will be the case, however I hope I have made it clear how easily this could happen. It may not, I hope it doesn’t, however we need to be aware of the fact that it could.

Behind all of this, organic growth will still occur, local businesses will grow, contracting companies will strengthen, retail will expand and disposable income will be increased in the region.

In Conclusion:

Would I invest in Gladstone? Long term the answer is no. Short term, well that depends how the poker tables are treating me at the time. The reason being, and as harsh as this may sound, I do believe in the greater fool theory. I’m not calling you a fool if you invest there; I’m making the point that when I see it prudent to get out, someone else may still see it prudent to get in. This may not happen however.

Would I sell property in Gladstone to my clients? Well that depends on the clients risk mitigation strategy, their goals for their portfolio, their knowledge of the Gladstone area, their ability to monitor the market and make a call if and when to get out. At the end of the day it us up to my clients to take the risk. I am not backwards in coming forwards in educating people about the risk of investing in certain areas. I would not recommend Gladstone to a first time investor or even an investor that does not have time to monitor their portfolio closely, of course, as a company we do as much as we can to do that for you; however at the end of the day it is your call and your responsibility.

If you did invest in Gladstone, timing is everything. Again I am not saying that it will go bust, I am saying that if it goes crazy over the next year or two, there is high potential for a harsh correction soon after. It will not be a ghost town; Gladstone is an industrial powerhouse and has many good industries behind it. However it has had its share of construction workforces artificially inflating house and rental prices for short periods of time in the past. Overall, it has come out ahead, as everywhere else generally has. 

What is a possible scenario is a boom and then stagnation or even a drop in prices until it comes in line once again with the rest of regional Queensland.

What is important to note is that Gladstone is not Port Hedland or Karratha which are both very prominent mining towns in WA. These towns are very remote and accommodation is in very short supply. You can buy a 4 bedroom home for just over $1,000,000 and achieve a 9.5% return. What is important to note is that Gladstone has many close by regional cities that can help service its needs. There is a lot of reasonable accommodation that is only a 1 hour trip to Gladstone. Whether these areas are utilised to relieve rental pressure only time will tell. Both Bundaberg and Rockhampton Councils are trying to see if there is any way they can benefit from this. 

I believe that with these areas and the potential release of 9000 blocks of land over the next ten years, that we will not see Gladstone property prices match those of Port Headland and Karratha. Rents may match those of Port Headland and Karratha, however, unlike Port Headland and Karratha; these rents will not be there for the long term.

Normality will resume if Gladstone goes out of control that we can be guaranteed. If Gladstone sounds like it is for you, choose carefully, it is not as easy as picking any property and going for it. It is not for the faint hearted and it is not for in inexperienced.

In my coming blogs I will discuss the opportunities and or pitfalls of towns like Chinchilla, Roma, Dysart, Moranbah, Mackay, Emerald, Blackwater and more. A post which will be most important for people to look at will be my research into how QLD’s mining boom will affect the rest of QLD and its property market. There’s some staggering figures and statistics to be assessed which will help us look outside the box for maximum capital gains. Buying in a mining region is not the only way to benefit from a mining boom. This will all be discussed in the coming weeks. I hope this information will help people look beyond the hype and see the reality before you take the plunge and invest.

You are in control of your own future, so control it properly!

Reference list for information in this article

www.gladstoneobserver.com.au

www.rpdata.com.au

http://www.glng.com.au/Content.aspx?p=90

http://www.aplng.com.au/process

http://mines.industry.qld.gov.au/mining/petroleum-gas.htm

GLADSTONE CENTRAL QUEENSLAND.....

Okay here's what I think of Gladstone... Prices are a bit everywhere at face value (realestate.com, agents etc) which is synonymous with many regional centers in QLD. However when you dig that bit deeper you can see the consistency.

There are a few areas of interest:

1. Barney point and South: I looked at two blocks there yesterday. One had just sold, it was approved for 4 x 3 bedroom units. It sold for 410k and still had 100k of headworks to pay! That's nearly the same price I can buy a house block in other towns for which will receive great growth also. What greeted me immediately in Barney point was a group of locals drinking on the beach at 1pm! The council still own a lot of land obviously as they had commission housing in the area.

I think it's a great place for High density units (a lot of it is classified as high density already) however for houses I think that people will continue out west in the newer estates with all the new services and shops etc. The only agent that said that the demographics are changing in Barney point is a guy who owns a house there. None the less, in the long term I think Barney point demographics could change.

2. CBD: There are a lot of 2 bedroom units in 4/5 story buildigns being constructed with high volumes of sales around the $450,000 mark furnished. Rental returns of approx $650- low $700 are the estimates for these new ones. There are many more approved sites for developments like these and another 4 in council currently at an advanced stage.

Western suburbs: this is where all the new estates are and are still going, a new woolworths is going right on the edge of town also. The shopping out there is good (approx 10 mins drive from CBD) however if you don't work in the CBD you don't need to come in to it all the time. New house and land starts at $500,000 however the standards of these homes are very poor in my opinion. It seems to be around the $550,000 range for a good package which is Val/ market value still. Many people who are spruikng the $500k packages are saying you are getting it for $50,000 less. You're just getting $50,000 of less house and or land. A $550,000 house will achieve approx $650 per week rent currently, whilst furnishing it seems to be the way to go and achieving $800-$1000. Even up to $1200 if you want to get creative and spend another $50,000 - $ 70,000. some builders are really bad! Especially Vantage homes, they are terrible here and even the real estate agents here warn against them. I feel sorry for the people that have bought some homes based on hype, when they need to resell on the local market the agents don't even like the house so what hope do they have to get the best return!

I am concerned about the construction workforce still. It has always been my concern and it still is to be honest. In 5 years many employees may not be here. CSG has a very large construction workforce and a significantly lower long term workforce. And the reality is that a lot of people here are a construction workforce. Gladstone has had many peaks and troughs in history as influxes of construction workforces has coke and gone. However, of course it has always gone up in the long term.
There is a lot more land coming on the market, there are currently 4 large unit sites (40+) for public comment with council. I don't have a doubt they will all rent out. But in 5 years? I don't know and I don't think I trust it yet personally for a long term hold. Land has risen from $180,000 last year to $250-$280 currently. The main shortage or residential land is NOW. Which means that land prices could be at or near their ceiling.

The mining companies won't currently rent a house that is older than 5 or 6 years. This is the first time I have seen this as it seems to be unique with the Coal Seam Gas industries. I was also interested in buying an old house and subdividing the block and battle axing. However with strict council zoning for smaller developments this seems harder than previously thought. In light of this, not all rents will soar, only new houses or units. Yes I am sure they will all go up, but it won't be port headland where you buy a 3 bedroom dump and rent it out for $1000 +. this seems to only come with the new properties.

This is the short of it. Someone said to make my blogs small, however when it comes to property investing there is a lot of information to know about an area so sorry...they will be big however very informative I hope! I have nearly finished dissecting the CSG (coal seam gas) companies EIS's (environmental impact statements) which are about 1000 pages each and will give you my final verdict on Gladstone today!

Finally about to set out on a journey throughout Regional QLD  to have an in-depth look into all the property investment opportunities that present themselves to take advantage of Australia's largest ever mining boom! Having travelled to many of these areas before, this time I am doing it differently. I am going to get to talk to locals everywhere and see what they think of the place they live, talk to fly in fly out miners and find what would attract them to move to an area, see what companies are investing and what they need in regards to accommodation and property. Then I will look at properties to invest in and to recommend to our clients. We will be looking in to property managers where we don't already have them in place as we know that this is sometimes a big issue for people.

feel free to ask questions along the way and if there is specific information you would like to find out let me know and I will do my best to find the answers!

Josh