Mining centres are they stable
- Thread starter kingchevy
- Start date
Some suggestions:
- read up on the mineral being mined, learn all you can about where the demand is coming from, and what the future of that demand will be. Considering most mining product is going to China and India, research whether a recession in the USA will effect Chindia's demand for your town's product.
- Talk to the local council and find out what plans they have to release more land for dev't.
- Research how restricted water storage will effect mining output and town growth.
- Get inside mining management and find out what plans they have to provide large worker's villages made from relocatable homes.
- And consider what might happen if Australia's resources boom does ease off significantly. Do you think property in any regional town will not fall significantly? Do you think the capitals will not also be adversely effected?
- Once you have considered all this, then you might want to find some leading indicators of a decline in demand for your town's product. Watch those indicators every week.
- consider using your +CF to buy a second property on the coast, within 30km of the Brissie cbd. The growth from that should weather a mining pullback better than anything else.
Doing all of the above will empower and prepare you more than any opinion expressed here.
- read up on the mineral being mined, learn all you can about where the demand is coming from, and what the future of that demand will be. Considering most mining product is going to China and India, research whether a recession in the USA will effect Chindia's demand for your town's product.
- Talk to the local council and find out what plans they have to release more land for dev't.
- Research how restricted water storage will effect mining output and town growth.
- Get inside mining management and find out what plans they have to provide large worker's villages made from relocatable homes.
- And consider what might happen if Australia's resources boom does ease off significantly. Do you think property in any regional town will not fall significantly? Do you think the capitals will not also be adversely effected?
- Once you have considered all this, then you might want to find some leading indicators of a decline in demand for your town's product. Watch those indicators every week.
- consider using your +CF to buy a second property on the coast, within 30km of the Brissie cbd. The growth from that should weather a mining pullback better than anything else.
Doing all of the above will empower and prepare you more than any opinion expressed here.
I know this has been discussed many times on the forum. In my personal opinion I think it essentially comes back to boom and bust and your interpretation on when one or the other in any asset or commodity sector will occur.
Having spent years in the mining industry and visiting nearly every mine in Aust and NZ I have to ask myself has the investment got good underlying value or is it based on one industry, one economic cycle and one commodity?
A recent visit to Andamooka in SA (sorry can't spell) where capital growth is in 3 figures looks really impressive on paper. The truth is it is the middle of nowhere the town looks like something from Mad Max there is drill rigs, dozers and broken trucks in nearly every front yard. I am sure the people who live there love it but the reality is that a constraint on rental accomodation in Roxby Downs seems to have driven the rental market north. Would I buy in these towns - nope - the main reason is that the the mine operators recognising the issue is building accomodation for 5000-9000 people - makes you wonder what will happen to the great rental returns.
Just my thoughts.
Buzz
Having spent years in the mining industry and visiting nearly every mine in Aust and NZ I have to ask myself has the investment got good underlying value or is it based on one industry, one economic cycle and one commodity?
A recent visit to Andamooka in SA (sorry can't spell) where capital growth is in 3 figures looks really impressive on paper. The truth is it is the middle of nowhere the town looks like something from Mad Max there is drill rigs, dozers and broken trucks in nearly every front yard. I am sure the people who live there love it but the reality is that a constraint on rental accomodation in Roxby Downs seems to have driven the rental market north. Would I buy in these towns - nope - the main reason is that the the mine operators recognising the issue is building accomodation for 5000-9000 people - makes you wonder what will happen to the great rental returns.
Just my thoughts.
Buzz
Put it this way, what do you think will happen to the renters if the mining boom goes bust? Do you believe the mining boom will eventually bust? Remember that mining is THE cyclical industry.
Alex
If the experts can't get a handle on it what chance do you have ???
Business section in the wekend paper had an article where some industry body were saying they got it wrong.
They originally forcast it would take 10 yrs to overcome the backlog and skills shortage in the mining industry.
Now they are saying they think it will be more like 20 yrs and that the shortage of labour will increase to 75,000 by 2015.
Doesn't sound like its going to run out of steam any time soon.
kp
Business section in the wekend paper had an article where some industry body were saying they got it wrong.
They originally forcast it would take 10 yrs to overcome the backlog and skills shortage in the mining industry.
Now they are saying they think it will be more like 20 yrs and that the shortage of labour will increase to 75,000 by 2015.
Doesn't sound like its going to run out of steam any time soon.
kp
So the question is where are we in the cycle, and how long will this cycle last ?
My opinion is that it has at least 10 yrs to run and probably more and with that I am investing in regional/mining areas.
Even if the rents HALVE they're still going to be better than I am getting in the city area.
And the historical evidence going back over the last 25 to 30 yrs spannig a number of boom / bust cycle show that rent don't collapse.
The go up quick, but don't necessarily retreat in a hurry.
Probably because most residents prefer to rent rather than make the commitment to buy.
But that has also changed.
Now everyone want to buy to escape the crazy rents...
kp
I haven't got any mining town investments, and don't intend to.
However, if you look at Australia's balance of trade, what our exports are now, we are in big trouble if the mining boom suddenly stopped. Sure, houses in mining downs would go down, but our economy would be that sick that everything else would go down too.
Australia is now geared into the mining boom. Long live the boom I say, for everyones sake.
See ya's.
We decided against mining towns for similar reasons to some above. Uncertainty. If you'd got in early when some places were really cheap , fair enough , but $500 / week on a 300K property isn't the sort of risk I'd think about. I'd want over 20 % to go into a mining town . You need a 10 % return to get cash flow positive ( on 100 % finance ) and the above return isn't at that level.
When I'm investing 300 K , I wouldn't consider anything where I was " gambling " on any element of the investment , certainly not with any thing like a ten year term . Nothing is that certain. Even if the mine has signed contracts, Chinese companies have shown over the last years that they are prepared to walk away from signed contracts when it suites them . If the overseas company goes bankrupt becasue of a global downturn where does that leave the Australian mining company supplying them ?
We've bought better returns than that a couple of K's from the centre of hobart ( 2002 ) and I'm sure at some stage in the future similar returns will be available in good areas again.
Cliff
When I'm investing 300 K , I wouldn't consider anything where I was " gambling " on any element of the investment , certainly not with any thing like a ten year term . Nothing is that certain. Even if the mine has signed contracts, Chinese companies have shown over the last years that they are prepared to walk away from signed contracts when it suites them . If the overseas company goes bankrupt becasue of a global downturn where does that leave the Australian mining company supplying them ?
We've bought better returns than that a couple of K's from the centre of hobart ( 2002 ) and I'm sure at some stage in the future similar returns will be available in good areas again.
Cliff
Thats exactly what I came up with in my head about the whole situation I am just not happy putting my money in mining areas at the moment. I wish I had bought before the boom though you could get a house for 70-90 thousand and in 2 years went to 300,000 but that was the same everywhere.
it doesn't make sense to me that you would actively seek out areas that are not blessed with economic good times - I mean Hobart over a somewhere like Karratha? If you want to be really conservative, just treat it as a depreciating chattel, so that whatever it is worth at the end of your mortgage period is a bonus
The mining boom market may or may not have 10 years left - todays Syd Morning Herald indicates that China has sent a warning they will soon half their Copper imports - I imagine those towns associated with copper mining may feel the pain.
As for Weipa my understanding with the released land ( remember the entire town is a mine lease and recent releases last year took 9 mths for the land and title dept to register the titles) the land goes to employees who enter a draw - for one unfortunate person last year who won the right to buy a parcel - obviously still paying for it - he found when he left his job he had to sell it back.
Mine operators are paying fantastic salaries to get bums on seats unfortunatley earning $150k a year driving a truck and living in luxury on the down days is mutually exclusive - anyone who has stayed in a demountable or mine house will relate. The reality is that the mines are onto this and now are investing in their own cams that they can move if needed to the next boom loacation with some effort. 2 years ago when looking at self storage sheds in Mt Isa ( seemed to me that renters may need extra storage) I was told that Xstrata was builing a large devlopement up there for employees with the rental being managed by the developer with no sales - things change but those operating the mines are doing whats is needed to get the best people.
In my mind look at the areas that are bases for those earning a mining income, Cairns, Mackay, Gladstone - they all have other industries as well.
Just a thought
Buzz
As for Weipa my understanding with the released land ( remember the entire town is a mine lease and recent releases last year took 9 mths for the land and title dept to register the titles) the land goes to employees who enter a draw - for one unfortunate person last year who won the right to buy a parcel - obviously still paying for it - he found when he left his job he had to sell it back.
Mine operators are paying fantastic salaries to get bums on seats unfortunatley earning $150k a year driving a truck and living in luxury on the down days is mutually exclusive - anyone who has stayed in a demountable or mine house will relate. The reality is that the mines are onto this and now are investing in their own cams that they can move if needed to the next boom loacation with some effort. 2 years ago when looking at self storage sheds in Mt Isa ( seemed to me that renters may need extra storage) I was told that Xstrata was builing a large devlopement up there for employees with the rental being managed by the developer with no sales - things change but those operating the mines are doing whats is needed to get the best people.
In my mind look at the areas that are bases for those earning a mining income, Cairns, Mackay, Gladstone - they all have other industries as well.
Just a thought
Buzz
It all comes back to knowing your market and knowing the forces that influence that market. To write off all mining areas because it is "a mining town" is crazy.
OSS
ol school skata obviously you're in weipa whats you're thought's on the area I just keep on getting a gut felling that the market is very artificial at the moment after the big capital gains seen. But on saying that the return is still there for buying a house on a 5 year lease then seeing "what you have left on the loan" At the end of five year's as all the property's worth and if you can sell it for more its a bonus?? or the other side the price's are going to stay the same for the next 5-10 years with no real jump. Also with chalco starting there mine in aurukun Hopefully in 2009 they will require housing for people straight away?
Thanks OSS for correcting me yes you were right the guy was in the process of settling when he handed in the resignation - hence he lost the block.
Too true all mining towns are not the same - Mudgee for instance - ravaged by drought and wine industry associated industry has 2 new coal mines starting. The Council had planning docs on their site 6mths ago with info on need for new accomodation and land releases. Great area - I loved living there especially the wine.
Buzz
Too true all mining towns are not the same - Mudgee for instance - ravaged by drought and wine industry associated industry has 2 new coal mines starting. The Council had planning docs on their site 6mths ago with info on need for new accomodation and land releases. Great area - I loved living there especially the wine.
Buzz
My personal thoughts are:
- If i was an RTA staff member and have access to the housing plan purchase option, i would be buying, depending on the offer price.
- I would't be paying retail for the new houses being built, prices too high and yields will not be sustainable at the current levels in the long term
- Tho still a mining town, the place is planning and is starting to diversify its economy especially in tourism and government services
- I would entertain buying a block of land, building and selling
- If i could grab commercial/office/retail zoned property/land i would jump at it (having tenants ready to go)
- Future of bauxite and alumina prices i believe will be affected by the increase in worldwide supply - so depends on the demand from developing countries as to what the price does...but who really knows what will happen here??
If the Chalco thing happens i think the option would be to establish a fly in fly out situation, with a camp in or near their mine site ie near Aurukun. They may even contract RTA to do the mining - is this what is happening with the Alcan lease?
OSS
