MORANBAH: BOOMING ONE DAY, BUST THE NEXT!

The perfect Queensland day is long past for the mining community of Moranbah. Its once BOOMING property market has now been decimated by the fall in the price of coal and subsequent closure of the local BHP mine.

This has had a tsunami like effect on this singularly focused economy and is being painfully felt by property owners in the entire Bowen Basin region.

The town welcomes visitors with its iconic “Big Red Bucket” in celebration of its dependence on the local mining industry – an industry known for its massive Booms and just as spectacular Busts!

At the peak of the mining boom, a fully renovated four-bedroom house in Moranbah sold for $820,000. In November last year, that same house sold for a woeful $170,000. Ms Exposito, Principal Licensee of Moranbah Real Estate recently sold a house bought for $720,000 in 2012 for $130,000.

According to figures from CoreLogic RP Data, Moranbah, located about 200 kilometres west of Mackay, has seen the median value of a home fall a whopping 66 per cent in the past three years from $751,989 to $251,933.

The rental market is also flat as thousands of workers from nearby mines have been let go as the mines close down or substantially scale back their operations. Rents have plummeted from approximately $2000 a week to $180.

This is the Boom Bust cycle of our economy at its best (or worst!).

As investors, there are MANY lessons for us to learn from this story, including but not limited to:

  • Lessons of Greed,
  • Lessons of how “this time it’s NOT different”
  • Lessons of Leverage
  • Lessons of how the Cycle operates

Every investment market operates with its own locational drivers; Moranbah’s being the commodity market. But as investors we always need to logically consider ALL the underlying drivers of each market. And one need not look too deeply to realise that there were some serious issues with this tiny commodity reliant community. In the 2011 census Moranbah had a population of a mere 8,965…..

With one dominate employer, a teeny population and exposure to the volatility of commodity pricing – a bust was always on the cards.

We say it over and over again. Concentrate your investing in Deep property markets – the Capital Cities. Here there are plenty of buyers and sellers, loads of renters and an abundance of employers.

Look at the demographics and infrastructure projects – these will drive pricing growth and this is why we like Brisbane so much – it has $137B of projects on the way.

But towns like Moranbah, will be affected by different locational drivers.

So do your research, then define and mitigate as much of your risk as you can.

IMPORTANT NOTICE
Disclaimer: Any opinions or recommendations expressed here do not purport to Financial Advice but rather should be considered General Advice and does not take into account your personal needs and objectives or your financial circumstances. You should therefore consider these matters yourself before deciding whether the advice is appropriate to you and whether you should act upon it. Should Financial Advice be sought, we suggest you seek such advice from an appropriately qualified advisor. Any yields, rental income, tax rates, interest rates, deprecation rates, inflation rates Dividends per Share (DPS) and Earning Per Share (EPS) etc shown are estimates only and should not be used as a guide to future performance. Past performance is not necessarily a guide to future performance and should not be relied upon for this purpose. Authorised Representative of PGW Financial Services Pty Ltd – AFSL 384713