mining town boom to bust

There are some massive shifts coming our way in the Australian Property Market in 2013.

One of the biggest is that much of the "shine" will start wearing off the mine.

By that I mean many of the gung-ho commentators touting mining towns as "sure-things" for property investors will end up with a large amount of egg on their faces as we get into 2013.

And the saddest part is, many hard-working Aussie families stand to lose their entire nest-egg and get themselves into a real financial problem because they followed the advice of these so-called experts.

Take Moranbah for example.

For many it's been the darling of the property market, offering massive 20% returns and capital growth of up to 40% in 2012.

RP Data shows that even as recently as last month, it topped the list of East Coast Australia's Top 40 Highest Rental Yield Suburbs with a gross rental yield of 12.9% (and that's the average yield - many properties have been getting as high as 20%).

And, amazingly, in September, RP Data calculated that it was actually cheaper to buy a house in Moranbah than to rent one due to the massive rents being paid by mining companies for employee housing (did I mention Moranbah is a mining town heavily dependent on just one industry with a large fly in/fly out population?).

These sorts of investments are attractive to investors with a 'High Risk' appetite and, throughout 2012, those high-risk investors seem to have been proven right - after all, their property values sky-rocketed and tenants scrambled to pay them huge rents hand over fist.

• So, why am I not jumping up and down with excitement?

• Why have I been warning my members to stay well clear of Moranbah from as early as January 2012, even while others continued to rush in (in fact, in January 2012 property sales in Moranbah doubled the amount sold at the same time the year before)?

Well, it will start to become increasingly evident as we head into 2013 (but by then it will be too late for those who rushed in and are stuck with over-priced, under-performing properties).

Here's the real story on Moranbah...

• Moranbah is in the middle of nowhere (central QLD - Bowen Basin), 1000km from Brisbane, 200km from the coast.

• It is a coal-mining town with a population of around 22,000 permanent residents and a fly-in/fly-out (FIFO) worker population of an additional 24,000

• Moranbah was reported to show 'no signs of slowing' in Jan 2012 (although, at that time, I was warning my members to steer clear, despite all the hype). In fact, the hype at that time included proud promotion of a new record sale price for a house in Moranbah that month @ $1.25mil. Investors surged the market snapping up $700,000+ properties with the promise of $2,000/wk+ rents.

• In August the Government intervened to announce it would flood the market with affordable land by March of 2013 to push down prices.

• By September of 2012 as coal mines cut back staff, little was renting, almost nothing was selling, and prices were crashing.

• Now, here we are in December of 2012 and more than 130 properties are sitting vacant, coal prices have fallen, jobs are being cut, house prices are reported to be falling at as much as $100,000/mth (yes, you read that right, 100k a month!), and Moranbah property investors are being told to reduce their expectation on rents to $360/week if they expect to attract a tenant.

The party in Moranbah is over! Where is next?

Phil Anderson.