Gladstone – Bubble to burst very soon ??

This report is prepared based on various statistics released by Gladstone regional city council and social impact analysis report from 4 major LNG projects , which are the main driving forces behind recent Gladstone real estate hype. This is only my view, however I strongly encourage the forum members to read the attached source of information and input their difference of opinion

Insight of Gladstone LGA

Current Population (YR 2010) –--------> 60316

Available Dwellings (YR 2006) --------->21568
Approved Dwellings (YR 2007)--------->756
Approved Dwellings (YR 2008)--------->1090
Approved Dwellings (YR 2009)--------->1174
Approved Dwellings (YR 2010)--------->1221

Approved total Dwellings Approximate (up to YR 2010) –---> 25809

Uncompleted residential lots out of approved (up to YR 2010) –-> 3994

Essential Dwellings under use / under development (up to YR 2010 SEP) ---->21815

Expected Demand (2011 to 2014 )

Total expectated demand for the all the 4 major LNG proejcts namely APLNG, GLNG, QCLNG and Arrow LNG

Temporaray workers ( 2011 - 2014 ) = 10300 ( Refer atatched table-1 for breakup)

only 20% of temporary workers expected to stay in Mainland = 2060

Other supporting company workers Aprox ( 10% of all ) = 1030


Expected Supply for next 10 Years

Approved but uncompleted residential lot available Approximate (up to YR 2010) –----> 3994

Other than that there are 2539 Broad hectares (BH) of land available to release for next 10 years

1 Broadhectare is Greater than 2500 m2 = Approximate 4 Dwellings (625 M2 / Dwelling), so 2539 Broadhectare = Aprox 10.000 new Dwellings

Now let us look at the Land release per year

2011 to 2012 ---------------> 746 BH = 2984 Dwellings
2013 to 2015---------------> 1838 BH = 7352 Dwellings
2015 to 2021---------------> 940 BH = 3760 Dwellings
2021 to 2031---------------> 1548 BH = 6197 Dwellings (not considered)

Other than these

Unscheduled land available for emergency ---------------->306 BH = 1224 dwellings
Workers Camp at Calliope to be leased for corporate----------------> 824 BH = 3296 Dwellings
Workers Camp at Clinton to be leased for corporate----------------> 824 BH = 3296 Dwellings

Summary
Lot approved but under developemnt / waiting for investors –-----> 3994 Dwellings
Potential availabilty By end of YR 2012 ----------------> 6984 (3994 + 2984) dwellings
Potential availabilty By end of YR 2015 ---------------->14,336 (6984 +7352) dwellings
Potential availabiltyBy end of YR 2021------------------> 18096 (14336+3760) dwellings

Plus

Emergency Release available for Council ----------------------------->1224 dwellings
Workers camp at Calliope and Clinton -----------> 6592 (2012 to 2015) dwellings

After 10 years Gladstone can have Aprox another 25,912 residential lots (subject to number of investor). It is 100% growth in supply whereas population will grow only 20 to 25 %

Demand vs Supply short term (2011 to 2015)

20% of construction workers from major LNG project = 2030

Other supporting company workers =1030

Unexpected floating population due to massive projects = 3000

Usual population growth 10% = 6000 = 2000 Families

In addition to the 900 properties available in RE today, another available

14336 lots can be converted in to potential rental properties

Demand 8060 vs potential supply 15236 (only private residential)

Demand 8060 vs potential supply 23052 (Private + emergency lot + workers camp)


It is worth to note that all the construction workers will be demobilised from 2014 by all major LNG companies. So no surprise if there is a spike in rental market until 2014

Demand vs Supply long term (2011 to 2021)

LNG companies permanent staffs = 1700
Other supporting companies = 100
Gladstone Nickel Refinery = 500
Unexpected population growth due to massive industrial developments = 3000 families
Usual population growth (22 % average) = 13,200 = 4400 families

In addition to 23052 available by end of 2015, another 3760 lots to be released

Demand 9700 vs potential supply 26,812

Gladstone Population YR 2021 (75000 or Aprox 30000 families) vs Available Dwellings 52,621

Some of the Interesting Observations

1.All four LNG project companies are committed to have temporary workers camp in Curtis Island to accommodate 80% of work force to avoid any unwanted impact in Gladstone housing market. Refer attached social impact study from APLNG and QGC

2.It looks like major mining and gas companies learnt good lessons in place like Darwin, Port Headland and Karratha and try to avoid the same type of ugly demand in Gladstone. This is what reflecting by means of workers camp , massive release of residential land for another 5 years so on

3.For past 4 years ( 2007 to 2010 ) totally 163 residential projects approved by Gladstone council , each of them approx 50 lots , totally accounted for 3994 lots , however only 24% ( 976 lots ) is under development until sep 2010.

Gladstone vs Port Headland comparison

PH
Available Land = 115 Broad Hectares
Demand by end of 2009 = 1400 dwellings
Approved up to 2010 Sep = 332
Construction Cost 4 BED avrg = 450, 000 $

Gladstone
Available Land = 2539 Broad Hectares
By 2010 Sep 76% of approved lots (3018) waiting for investors
Construction Cost 4 BED avrg = 250, 000 $
 

Attachments

  • Table-1.pdf
    14.7 KB · Views: 137
  • APLNG Social Impact Assessment.pdf
    750.8 KB · Views: 172
  • Snapshot of future residential development.pdf
    1.5 MB · Views: 215
Additional attachments to the above post

Additional attachments to the above post
 

Attachments

  • QCG-Workforce-Accomm-Curtis-Island.pdf
    140.3 KB · Views: 1,427
  • SANTOS Construction_Accommodation_Facility.pdf
    422.6 KB · Views: 157
  • Gladstone Nickel Project (GNP).pdf
    1.9 MB · Views: 481
what is your definition of very soon for the bubble to burst?

i extremely doubt rents or values will approach Port H or Karratha levels I would be more than willing however to have a wager for any amount you want that the values will not burst in the short term.
 
Sam oz that was a good post and appreciate all that work you put into that. You have some very good points and I think you are genuinely trying to give us some warning which I personally think is a good thing.

This is my spin on it and only my view.

I was reading some posts on this forum going back to 2003 where they were talking about 1.5 billion dollar projects. 5 years later they are talking about 35 billion dollar projects. In another 5 years (2013) they could be talking about 100 billion dollar projects. Especially when all the infrastructure is built to handle the stuff going on now.

I know it is a big if for 100 billion dollar projects to happen but I firmly believe Gladstone is going to continually attract these projects etc as it is positioned so well to do this now. It will be a super mega port of massive importance to Australia and the world and by 2050 will be home to 250000 people minimum. The spin offs will be massive.
 
what is your definition of very soon for the bubble to burst?

i extremely doubt rents or values will approach Port H or Karratha levels I would be more than willing however to have a wager for any amount you want that the values will not burst in the short term.

This is my conclusion.

Now the rental demand is very high and in few months time it might go in negative (Supply < Demand). Remember this is only temporary rental demand. This is going to attract 1000s of investors towards 1000s of approved lots available for development. Possibly from 2014 when the constructions workers are demobilised, demand comes down, but the supply keeps increasing. Potentially at least another 6000 dwellings to be added before 2015 (3990 from the approved residential projects and 2000 from private investors) due to attractive rental yield. But what happens after 2015, when the rental demand comes down? There will be over supply!! Limited land availability will restrict this and keep the market steady for long time , same as Port Headland but in Gladstone you got lands for another 60,000 people easily

Same thing happened in Darwin. Huge Demand from 2003 to 2005, negative supply and very high rental yield which attracted many interstate and overseas investors. Massive investment in Darwin / Palmerston real estate market from 2005 to 2008 . Now the Situation is totally opposite, over supplied Darwin inner city apartments are waiting for years to sale, unbelievable price reduction in the northern suburb house prices ( like 25% ) still in the market for months

So get out of Gladstone before 2015 , before the bubble burst .Unless there is another 60 billion $ investment after 2015, nothing can stop this
 
I've got a couple of questions and a few opinions too.....


The title of your post is sensationalist at best and infers that Gladstone is already in a bubble. I'd like an explanation on your definition of a bubble because from where I sit it isn't even close.

A bubble suggests unsustainable growth which Gladstone is still yet to have. It might happen, but it hasn't.

The Gladstone versus Port Headland debate is a non argument. You can't compare the two, the characteristics of the two are poles apart and adding the blurb to your post is pointless.

How about we just analyse Gladstone for what it is rather than try and align it with something it clearly isn't


Your post lists the 5 years from 2006-2010 where by a total of 4241 approved dwellings were constructed.

Later in your post you dole out a statement (IN BOLD RED) that there is the potential supply of 15236 residential lots.

Now correct me if I'm wrong, but in the preceding 4 years the Gladstone building insudtry pumped out a total of 4241 new dwellings and you are trying to tell me that they are somehow lift that by almost 400% and make available 15236 new dwellings?

Dream on mate.

You've gathered some nice stats there but have somehow managed to twist them into a ridiculous and sensationalist piece of rubbish.

It will come down to supply and demand. It always does.

Land will not be released if the demand isn't there and developers won't proceed if there isn't a margin in it for them.

Like the end of any big project, in any big town across Australia, there will be an oversupply at the end.

How big depends on if/when a bubble actually happens.

So far, it hasn't.

Rooster
 
you are also confusing land availability in the region of gladstone with what is available in the city of gladstone.

calliope is already too far away and the traffic will soon be a nightmare coming from the new estates into town and work. Like nearly every city in the world property close to the city will be the most expensive and those that buy the wrong type of property will suffer the most when Gladstone has its next correction.

if you take the boom of 2006, 2 bedroom units went from $125k to $250k and back to $200k for three -four years, not such a bad result, now they are high $200k's. The key is not to buy too late in the cycle and not to buy a lot of the crap developers are selling. There is gold in that town, just a matter of who wants to collect it.
 
First of all why this much aggressive ! Do you own the complete Gladstone council

I said this is only my view and welcome forum members to input their opinion. This is Just a discussion not a judgment


I've got a couple of questions and a few opinions too.....


The title of your post is sensationalist at best and infers that Gladstone is already in a bubble. I'd like an explanation on your definition of a bubble because from where I sit it isn't even close.

Gladstone is top on every investors list now a days whereas the actual situation is something different , if this not bubbles , you name it , let us know

A bubble suggests unsustainable growth which Gladstone is still yet to have. It might happen, but it hasn't.

I attempted to highlight the possible slowdown after 2014


The Gladstone versus Port Headland debate is a non argument. You can't compare the two, the characteristics of the two are poles apart and adding the blurb to your post is pointless.

PH data was there not to compare but just to give an example why it is sustainable market

Your post lists the 5 years from 2006-2010 where by a total of 4241 approved dwellings were constructed.

Later in your post you dole out a statement (IN BOLD RED) that there is the potential supply of 15236 residential lots.

Now correct me if I'm wrong, but in the preceding 4 years the Gladstone building insudtry pumped out a total of 4241 new dwellings and you are trying to tell me that they are somehow lift that by almost 400% and make available 15236 new dwellings?

I wonder if you have opened any of these attachments before you write here , anyway let me explain once again


Uncompleted residential lots out of approved (up to YR 2010) –-> 3994


Potential supply


2011 to 2012 ---------------------------------------------> 746 BH = 2984 Dwellings
2013 to 2015----------------------------------------------> 1838 BH = 7352 Dwellings


Total ( 3994+2984+7352+ 90 available in RE as of 22/06/2011 ) = 15230

Your question is correct, how to find investors for 15000+ approved lots and available lands in just 4 years...??

Definitely it is possible if we continue to promote Gladstone same like now

From 1 June 2010 to 31 May 2011, no of first home buyers in NSW is 32, 396. Do not jump again , I am not comparing Sydney to Gladstone or investment to recidential , this is just to given an idea of no of new people coming to the market


Land will not be released if the demand isn't there and developers won't proceed if there isn't a margin in it for them.

When you are excited about 200% hike in rental market , why developers cant get headcounts to make it possible

How big depends on if/when a bubble actually happens.

my basic questions to this investment giant


1. Anything can stop unreasonable spike in Gladstone rental market for another 3 years ?

2. When 3 / 4 BED house is earning 600 to 800 / week , When city council approved / ready to release 1000s of Lots , is there any reason that Investors will not turn-up !

3. Finally can you speculate what will be market price for 4 BED off the plan in place like Calliope in 2015 ? Do not answer it is future , I expect you guess based on your experience in Gladstone market ?

Rooster
 
if you take the boom of 2006, 2 bedroom units went from $125k to $250k and back to $200k for three -four years, not such a bad result, now they are high $200k's. The key is not to buy too late in the cycle and not to buy a lot of the crap developers are selling. There is gold in that town, just a matter of who wants to collect it.

Hi Mate

I agree with you

Land availability is coming from the city council reports , not my own. There are 3 images explains the approved lot for each area and available lands for future . If you have any specific questions on any numbers let me know
 
Now this is aggressive!!

BTW I have always had a 3-4 year investment horizon for Gladstone, (I purchased a year ago), as there is truth to approx 10k construction workforce, vs 2k ongoing workforce. Definitely a matter of timing the market, not time in the market.

It seems however that if you are correct and 80% will be temporary worker accommodation, then there won't be such a boom-bust cycle.

The point made by another poster is quite correct, that a town that becomes a super-infrastructure town attracts further significant investment. Just think of the benefits of a township with an inexpensive, inexhaustable, clean burning fuel from multiple sellers and a deepwater port for any major corporates looking at investing in infrastructure projects in Australia. Given how remote Hedland and Karratha are and the comparison of Gladstone, it will be a no brainer which of these 3 options they would choose to invest in.

Just look at the numbers, for every man, woman and child currently in Gladstone, they are investing approximately $1 million. That has to flow through every part of the local economy, including housing. It always amuses me when I hear housing experts talking of the flow on effect on the Brisbane housing market of $5 billion in funds about to be spent there, which works out to approximately $2,500 for each man, woman and child. The investment scale is incomparable.

Also note that if you want to measure occupied houses, you need to look at rental vacancies (0.4% currently), not the number of houses for sale.

I have seen many estimates that Gladstone's population will double in the near future, long-term any city doubling its population within 2 decades will struggle to have enough housing.

I also understand that the Council is under huge pressure to have enough resources to approve a current backlog of DAs, let alone the thousands that you are referring to that would be required.
 
Boy ... reading the ups and downs make decisions very difficult. Just came back from from a walk with wife and dog. The three of us came to the conclusion we should sign the contract Monday (tomorrow) on a house. It's brand new, finishes in about 3 weeks. $600k at Boyne Island with 4 bed, 2 bath, 2 car, 2 living areas and double storey. It's got a contract with an LNG company for $800 a week for 2 years with a 1+1+1 option after that.

We went up there a few weeks ago - Gladstone isn't as bad as I remember it.
 
Boy ... reading the ups and downs make decisions very difficult. Just came back from from a walk with wife and dog. The three of us came to the conclusion we should sign the contract Monday (tomorrow) on a house. It's brand new, finishes in about 3 weeks. $600k at Boyne Island with 4 bed, 2 bath, 2 car, 2 living areas and double storey. It's got a contract with an LNG company for $800 a week for 2 years with a 1+1+1 option after that.

We went up there a few weeks ago - Gladstone isn't as bad as I remember it.

That is good. I am getting lot of positive reaction on this thread; it gives me confident about the market

What about Calliope Elliot’s Hills estate !!

Few lots left on 430K$ marks, but issue is completion date. Developer has no fixed plane, and the land to settled still
 
$600k at Boyne Island with 4 bed, 2 bath, 2 car, 2 living areas and double storey. It's got a contract with an LNG company for $800 a week for 2 years with a 1+1+1 option after that

Only 6.9% yields?.
Ok after depreciation you'll be neutral but why are you buying it?
Hopeing for capital gains or do you have other plans for it?
I can imagine a situation where 2 years later interest rates are +9% and are about to move upwards,
prices have not gone up and you want to offload the property and because its out of town none wants to have it.
Is that possible? maybe...?
 
Only 6.9% yields?.
Ok after depreciation you'll be neutral but why are you buying it?
Hopeing for capital gains or do you have other plans for it?
I can imagine a situation where 2 years later interest rates are +9% and are about to move upwards,
prices have not gone up and you want to offload the property and because its out of town none wants to have it.
Is that possible? maybe...?

Not sure what you mean by "out of town" BV?

Boyne Island and Tannum Sands would be the two premier spots to live in the Gladstone area.

Close to beaches, the river and away from the majority of all industry.

I guess a lot of people see the opportunity of a 6% plus yield with possible future capital growth upside.

I can also imagine the situation where interest rates go down and you start to delve in to positive territory.

Cheers

Rooster
 
Hi Rooster
Sure 25Km isn't too far.
You could be right there and it could be a fine invesment decision.
I just felt like playing devil's advocate for a bit because we often invest with our hearts and not doing the sums. That's all.
 
I'd be very happy to get something better but I do think it sounds pretty good. On our visit we did talk to a lot of people and the theme seemed to be people ... especially locals, prefer Boyne/Tannum for the reasons Rooster mentioned.

We looked at the new estates and understand their attraction but thought Boyne/Tannum, double storey on contract was a safer way to go. If the market does take a hit in the future at least the place isn't in 'just another' new estate.

As for the interest rate issue I agree that is an exposure but it always is. Our plan is to fix for 2 year at 6.99% (also an option for 3 yrs @ 7.19%). But I'm guessing that 'the real economy' won't allow the Reserve Bank to do a lot more going forward. Things are just too soft.

Our head space is:-
1. Assume we don't have the LNG contract after two years
2. Assume 5% growth in underlying rent from the real price now - say $675pw = $744 in 2 year say $750.
3. Assume interest rates are similar - with 0.5% to 1%

Based on that it won't kill us.

Plan is buy and hold - current age 50 (in a couple of weeks). Hopefully some capital growth sufficient get get another 1 or 2 probably in Brisbane.

We took a big hit on shares a few years ago and can't afford to get this wrong ... so if I am wrong I am keen to hear.
 
Also worth mentioning that there was no shortage of people out on a Friday night spending money at reasonable restaurants. As I said Gladstone seemed a lot different to last time we were there ... about 6-7 years ago.
 
Our head space is:-
1. Assume we don't have the LNG contract after two years
2. Assume 5% growth in underlying rent from the real price now - say $675pw = $744 in 2 year say $750.
3. Assume interest rates are similar - with 0.5% to 1%

Based on that it won't kill us.

Plan is buy and hold - current age 50 (in a couple of weeks). Hopefully some capital growth sufficient get get another 1 or 2 probably in Brisbane.

We took a big hit on shares a few years ago and can't afford to get this wrong ... so if I am wrong I am keen to hear.
Ok so you did know that the rent is inflated and you could afford to hold it at $750/w.
I don't know if you are wrong or not.
None knows what the future holds but it is certain that property prices and rents are quite high so they could stall and even fall.
Investing in an already expensive market is a bit of a gamble so unless I was buying something to hold long term or to live in it myself I wouldn't do it.
I'd be more confortable with a Brisbane property but that means I could be missing out on some good income from the mining companies but I don't want such income because I'm not so sure that capital gains will come.

Edit: I've seen new properties lose value after a couple of years of use and abuse so check out the prices of 2nd hand properties in the area and imagine your property to be tracking the prices of the other ones (in a couple of years time)
 
Ok so you did know that the rent is inflated and you could afford to hold it at $750/w.
I don't know if you are wrong or not.
None knows what the future holds but it is certain that property prices and rents are quite high so they could stall and even fall.
Investing in an already expensive market is a bit of a gamble so unless I was buying something to hold long term or to live in it myself I wouldn't do it.
I'd be more confortable with a Brisbane property but that means I could be missing out on some good income from the mining companies but I don't want such income because I'm not so sure that capital gains will come.

Edit: I've seen new properties lose value after a couple of years of use and abuse so check out the prices of 2nd hand properties and imagine your property to be tracking the prices of the other ones (in a couple of years time)

Spot on

Definitely Gladstone deserves the good short term benefit but loner term is big ???

At the same time, it is very hard to ignore the place getting such a massive scale of investment

When today`s property comes market after 4 years , there will be Off the plan sold for same price in new developing Areas , so people will have choices

These are best examples

5 Years old 4 B house for 440K$

http://www.realestate.com.au/property-house-qld-calliope-107250643

At the same time, new off the plan just the next street is for 435$

http://www.realestate.com.au/property-house-qld-calliope-107413708?listingType=buy
 
Yeah I'm afraid I'm steering clear of Calliope ... I heard lots of negative stuff about the place when in Gladstone. Apparently the oversupply situation is already in full swing and capital growth going forward is a real problem.

It's interesting we found out more in a day in Gladstone than I had in weeks researching on the net.
 
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