The decision whether or not to invest in mining towns at this stage comes down to your view of where we are in the cycle.
Three years ago this was all supposed to end in 18 months at that point in time. That was 18 months ago and sure there is weakness in most commodities but a longer term view needs to be taken.
If you believe the resources boom will end in the next 2 to 3 years then you would not be buying in these areas but if you subscribe to the stronger for longer argument then you are looking at 10 to 20 years in which case you would be having a look at these areas.
The commodity markets can be volatile both ways so I would not be surprised if gold were to drop below $800 US but just the same I would not be surprised if it went back above $1,000 US again in 2009.
The 2 major commodities driving Kalgoorlie are Gold and Nickel.
I have some property interests in Kalgoorlie and though I could be attacked for having a vested interest there I can only go on my experience which is rising rents and rentals being filled quickly, usually within a week. It still offers one of the best yields in Australia, particularly for commercial properties.
I am conscious of the Superpit closing down possibly around 2015/16 but it will still have some tourist appeal. But if it does stop that will be a challenge for the town.
With over 30,000 people it has a solid base and not everyone works in mining although I do concede that most of the activity there spins off the mining activity.
If the stronger for longer scenario in commodities eventuates then IMO you would still do well buying in Kalgoorlie. As with any proerty investment you need to take a long term approach and trust your research and judgement. If you become too reactive to the daily press regarding the economy and commodites and the rises and falls in the gold price then you will end up being a bundle of nerves.
I read in a property magazine about 2 years ago that the projected population for Kalgoorlie in the next 12 years was to go to 40,000. I don't know where they got this from but if this eventuates then where will the extra 10,000 live ?
From my research there is a bit of land-lock there with mining leases and native title rights etc surrounding the town and restricting significant development outwards.
From what I know there are some new developments and some new land being released but enough to cater for a lot more people coming to the town. Maybe not.
But yes it is really a play on commodities. If gold and nickel can stay up and costs be contained within reason so that new mines can open and existing mines stay profitable then things will be good. If the opposite happens well that would not be good.
So that is my "clouded view". What we all know is that we cannot predict the future with any certainty but we all need to do our own research and be happy with our investing decisions.
I would be interested to hear others views on the town.
