Gladstone - Boulder Steel.. Gone....

[Whishy]

Gday,

Look im a resident in Gladstone and Im tossing up buying here for future investment...

However I work in the construction sector and note the following:
- Work is dying off. Simple as that, I am an estimator for new work, and its just dead.
- There is a lot of talk about workforce, unfortunately the workforce is manned in camps, not houses.. I frequent curtis Island and there is thousands of available rooms for accommodation.
-Rent has dropped significantly.

And the biggest one, is as per the following. Boulder Steel, gone.... So whos next?

http://www.gladstoneobserver.com.au/news/steel-plant-hold-boulder-goes-administration/1957010/


Sure the rent yields are great still, however Im just not sure. I want to as it is ideal for my current situation, however what factors in my decision should i also be considering?

Thank you.

 

[Propertunity]

.....however what factors in my decision should i also be considering?

You should be considering buying somewhere that it is a confirmed rising market - not considering buying in a confirmed declining market (just because it is somewhere you are familiar with)!

 

[Whishy]

You should be considering buying somewhere that it is a confirmed rising market - not considering buying in a confirmed declining market (just because it is somewhere you are familiar with)!

I suppose I should have stated it a little better.

What Im trying to come to terms with, is why everyone is still investing here... What is it I am failing to look at when all I see is exactly that, a declining market.

 

[Propertunity]

I suppose I should have stated it a little better.

What Im trying to come to terms with, is why everyone is still investing here... What is it I am failing to look at when all I see is exactly that, a declining market.

Well it is just the "herd" mentality and the un-educated newbie investors doing it - it will most likely end in tears for some.

 

[Whishy]

Im looking at a property for $350k on 800m2 in the middle of an established suburb. The list price is 20k lower than the sellers purchase price in 2011.

Its tempting as it has so much renovation potential and is perfect for the current family..

But who knows whats going on around here to justify it really...

 

[DavidMc]

Hi Whishy - what do you think of Gladstones medium to long term potential (i.e. what will the population, jobs and general activity be like in say 3-10 years)?

Also, what would it cost to rent that same house you are looking at buying?

 

[Whishy]

Without doing much research yet, I would say rent for the house I am looking at would be between the $420 and $460 range. However, I would expect this to drop continuously over the next year.

3-10 years theres plenty of talk about good long term stability.. 0-3 years I am worried about.

Here is where my research has lead me.

If I were to purchase now, it is the start of a declining market.. I would see losses for the next 3 years, then would probably take another 3 years to recover.

Projects wise, this place has really dried up.. Gone are the $100+m tenders, more are GRC sub $10m tenders. Then throw in Boulder Steel going bust today, Cockatoo Coal not opening up the Baralaba Mine (Supposed to supply WICET), and WICET reducing the Tunnels scope from 4 to 2 offloading facilities, it doesnt look good.

The size of the now constructed camps are basically mini cities, and to think that the peak of LNG has come and gone, whats next??

Sure, there are plenty of approved projects in the pipeline, but there is now so much insecurity regarding the prospects, Im really not sure..

May look at purchasing some land and relocating a house here for some quick short term gains, or high yield rents during the lull maybe??

Long Long term, I can see it being destined for City Status.. But for the next 3 years, I see a lot of vacancies, developers moving out now that oversupply has been reached, and unemployment numbers increasing.

Its pretty clear, it takes a lot more people to build these facilities, than it takes to run them...

But, Im in long term in employment here, so I dont know what to do. Contemplating moving to Rockhampton for PPOR and travelling each day. Not sure.

 

[Waldo]

Something else to perhaps consider - is investing in a place where you work a good idea if the jobs may be drying up?

Investments with risk are ok, however you need to ensure that you have a fall back position - if the risks that apply to the investment are the same as the risks that apply to your job you may be in trouble.

I know a number of people who have bought where I live (mining town in SA). Not only are vacancy rates the highest they have been in years & prices falling, but suddenly they have lost their jobs too (and hence no way of funding their investment while it is struggling).

While Gladstone is unlikely to struggle quite as spectacularly as where I live, I imagine the risk still could be quite high.

 

[longterm]

One of the top 3 places to invest if you are looking for a long term capital growth. There will be fluctuations and that gives people like me to go for that killer deal when market is down. Patience is the key.

If you are speculating then it is a different ball game all together and short term there will be pain in Gladstone market but things will turn as the fundamentals are strong.

Please note that with any investment there is risk and you should be confident in your research and that is the only thing you are 100% in control.

I just bought one more property, let me know if u need any help

 

[DavidMc]

3-10 years theres plenty of talk about good long term stability.. 0-3 years I am worried about.

Just a quick comment - property should be viewed as a 5-7 (or even 7-10) year long investment. No matter what anyone says, NOBODY can accurately and consistently predict the next 0-3 years (although there are no shortage of people who claim to or try to!).

What does happen though is when things are bad, people think they are going to continue to be bad (even 6 months after any upturn). When things are good, people think they are going to be good (even 6 months after any downturn). The idea is the perception of the market lags the reality of the market.

Everyone is thinking doom and gloom now, which is the BEST time to buy. I do know there are people who bought on the promises of insane yields and are hurting now and wanting to sell bad. i.e. you're talking about a 350k property that sold for 370k in 2011 - what a steal! Maybe another 6-12 months will be even better, although one will never really know.

Look at the history of growth in Gladstone over the last 10 years, it's a very boom/busty market. One can happily stay in this market because of the excellent yields.

The last two years have been flat, but this could all be very different in 2 years time. If this level of volatility is too much, you could try a something like a Brisbane outer suburb for your first investment.

 

[Whishy]

Thanks mate.

I have an IP in Bellbird Park in which I purchased in 2009 for 310k. The value dropped considerably until late last year/early this year where it has really started to come up in leaps and bounds. I had spent a few years there wondering why I rushed into it but it seems to be going ok now. Still negatively geared only renting at $250 per week however long term prospects seem o.k with plenty of surrounding infrastructure coming up tops.

Not sure what your thoughts are about onthehouse.com.au but last year it had a prediction of 276k, now its up to the upper limit being 368k.

In saying that though, Im now looking at Rockhampton where there are some extremely good yields occurring in a market which is set to go pretty well in the coming years..

Too many decisions...