Yardney - Don't Invest in Mining Towns
- Thread starter JIT
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As with most things you can't just point to one factor. Access to land is a key issue, particularly when you have big piles of dirt and salt in the middle of everything and industry crying out for access to large swathes for new stockpiles, ports, rail access, power line easements, etc etc etc. Of course red tape on native title is a problem but so are storm surges on high tide in a cyclone. It's pretty flat around there. Lots of land just can't be touched for one reason or another.
Of course construction is very exxy when everyone's labour and accommodation costs are so high as well. So you've got both land and building cost issues.
And even when you re-zone an entire town centre, high density development just ain't that cheap in a cyclonic area. It's plenty more expensive than single housing in Perth, let alone up there. Sure it can be done and is being done but it's not cheap by any stretch.
And that's the point for me - it's not "hard" to bring on new supply - anyone can do it. It's just expensive and only happens when existing values and rents are high enough to bring it on. You can get an idea of where that point is in these "towns" by taking a look at how long they have been able to sustain these values and rents, the amount of new supply they have been able to bring on and how much it costs.
Ian - no need to apologise - that was a fantastic post. A look through longer term history reveals these "towns" (Hedland and K-town) have certainly tanked before wrt property (I don't mean HBI) but the global resource industries at the time were also very different. K-town can't be called a "mining town" at all in my view. More wealth flows through there than Perth! Diversified iron ore, natural gas, fertiliser and salt industries - efficient and low cost in each case with (eg Rio) infrastructure that was paid off decades ago. Massive tonnages flow between Lambert and Dampier, not to mention the LNG. The fact that somewhere like Karratha gets lumped together in the same category with a town like Ravensthorpe just shows how ridiculous this type of discussion about "mining towns" can get! It's like comparing a US aircraft carrier with my fishing boat...
Good read ,Ian thanks
only years earlier in the 90,s this place sold for around 83 -87K in Karratha because there was a panic that work was ending on one of the trains on the LNG it was built 18months earlier for around 170K to 190K. The interest rates at the time where over 18% it was still making money.
It was sold with a guaranteed rental of $350pw per for 9 months.
If you where lucky enongh to live in a statehouse (older one) they where offered to you for $70K.
only years earlier in the 90,s this place sold for around 83 -87K in Karratha because there was a panic that work was ending on one of the trains on the LNG it was built 18months earlier for around 170K to 190K. The interest rates at the time where over 18% it was still making money.
It was sold with a guaranteed rental of $350pw per for 9 months.
If you where lucky enongh to live in a statehouse (older one) they where offered to you for $70K.
G'day Seabreeze, Intrigued & All,
I'd heard from guys who did their schooling in Dampier & Karratha back in the late 80's talk of when house prices crashed on the back of LNG1 & Domgas construction finishing, high interest rates (as in 16 - 18%) etc. and I've always kept these tales in mind when looking into investing there. And I agree 100%, some of the market ups, downs, plateau and skyrocket can be unsettling but the longer term view also needs its fair consideration.
I think Seabreeze' prior comments are a timely reminder for people who might be looking at some of the more one horse towns to really be aware of. To research the company(s) as much as possible, check with local Shires and some of the affiliated construction / service companies in the area to see what work they are doing and what sort of contracts are coming up. Read up on these companies either in the Fin review or on the internet and get a feel for project longevity. None of this is hard to do, make a few phone calls and just ask some polite questions and you'll find the info freely forthcoming.
You can ask RE agents if you like, but they'll most likely talk *****e to try and move their stock, particularly if they've been struggling.
A critical point is that WA is a safer environment than Qld. purely because it doesn't have the debt that Qld has and the Govt is far more stable. To wit, as much as I can't stand his presence on TV, Barnett is ensuring WA consolidates it's position to the point where the Pilbara Cities initiative and controlled, staged development releases through Landcorp should hopefully iron out some of the future resi peaks & troughs into a sustainable environment in some of the regional towns. Queensland on the other hand simply hasn't got a f#$ken clue....period!! They are still playing catch up with the likes of Moranbah rents going up......it's all new to them. They've been drunk as monkeys on raw sugar cane juice this last 40 yrs and have suddenly realised things are happening. The companies behind the Gladstone region resurgence are doing the driving & developing; Bligh is just getting dragged along behind it. Campbell Newman for the LNP is an absolute prima donna goose who is second only to Tony Abbot in the boofhead, i'm out of my league stakes.
People also start having kittens about cyclones, but as has been pointed out already, it is the risk of Storm Surge and subsequent tidal flooding is the main concern. The winds aren't going to blow the newer dwellings over (mind you I hope the back packer roofing team used the right TEK screws), and who cares anyway?.......insure yourself properly!!!. As always, the crap TV reports always show palm trees blowing about, trying to over dramatise things.....whoopty whoop!!
The strata meetings out back aren't an issue - we do all ours on email there's sweet FA involved. Insurance is $1500, Rates $2000 and I don't pay agents fees (self managed - there's nothing to manage with corporates in our case - money goes straight into bank). But seriously, if anyone is going to start getting bogged down on feeling they need to know all about rates or insurance or what happens when the wind cranks up, then clearly, clearly they haven't got the mindset or nurries to invest outside of putting 50c into their primary school bank book each week......so don't even think of playing in this sector.....stick to the burbs.
Pt Hedland is land locked or jiggy-boo locked, Sth Hedland is flood prone & jiggy-boo locked. Land release is restricted there, so Belbo should end up coming out of this ok. Karratha is under slow land release too - can't wait for Mulataga latte strip to get underway in the mosquito & sand fly flats, what a joke.....first tidal surge and see ya later @#$%heads!!!!
For people who are still edgy about Karratha or Hedland, I would start looking at Broome again and Kununurra - but try to look at being creative (value add), buy land and build rather than buying retail, check out commercial opportunities or resi short term letting. Buy in costs are biggish but not obscene; get a JV happening, pool your buying power. There's opportunities galore if you get off your ar$e.
If anyone is still nervous...........GO AWAY!!........you don't belong in the bush.
Is that aircraft carrier of yours in the driveway or on a mooring Seabreeze?
I need my coffee....see ya.
I'd heard from guys who did their schooling in Dampier & Karratha back in the late 80's talk of when house prices crashed on the back of LNG1 & Domgas construction finishing, high interest rates (as in 16 - 18%) etc. and I've always kept these tales in mind when looking into investing there. And I agree 100%, some of the market ups, downs, plateau and skyrocket can be unsettling but the longer term view also needs its fair consideration.
I think Seabreeze' prior comments are a timely reminder for people who might be looking at some of the more one horse towns to really be aware of. To research the company(s) as much as possible, check with local Shires and some of the affiliated construction / service companies in the area to see what work they are doing and what sort of contracts are coming up. Read up on these companies either in the Fin review or on the internet and get a feel for project longevity. None of this is hard to do, make a few phone calls and just ask some polite questions and you'll find the info freely forthcoming.
You can ask RE agents if you like, but they'll most likely talk *****e to try and move their stock, particularly if they've been struggling.
A critical point is that WA is a safer environment than Qld. purely because it doesn't have the debt that Qld has and the Govt is far more stable. To wit, as much as I can't stand his presence on TV, Barnett is ensuring WA consolidates it's position to the point where the Pilbara Cities initiative and controlled, staged development releases through Landcorp should hopefully iron out some of the future resi peaks & troughs into a sustainable environment in some of the regional towns. Queensland on the other hand simply hasn't got a f#$ken clue....period!! They are still playing catch up with the likes of Moranbah rents going up......it's all new to them. They've been drunk as monkeys on raw sugar cane juice this last 40 yrs and have suddenly realised things are happening. The companies behind the Gladstone region resurgence are doing the driving & developing; Bligh is just getting dragged along behind it. Campbell Newman for the LNP is an absolute prima donna goose who is second only to Tony Abbot in the boofhead, i'm out of my league stakes.
People also start having kittens about cyclones, but as has been pointed out already, it is the risk of Storm Surge and subsequent tidal flooding is the main concern. The winds aren't going to blow the newer dwellings over (mind you I hope the back packer roofing team used the right TEK screws), and who cares anyway?.......insure yourself properly!!!. As always, the crap TV reports always show palm trees blowing about, trying to over dramatise things.....whoopty whoop!!
The strata meetings out back aren't an issue - we do all ours on email there's sweet FA involved. Insurance is $1500, Rates $2000 and I don't pay agents fees (self managed - there's nothing to manage with corporates in our case - money goes straight into bank). But seriously, if anyone is going to start getting bogged down on feeling they need to know all about rates or insurance or what happens when the wind cranks up, then clearly, clearly they haven't got the mindset or nurries to invest outside of putting 50c into their primary school bank book each week......so don't even think of playing in this sector.....stick to the burbs.
Pt Hedland is land locked or jiggy-boo locked, Sth Hedland is flood prone & jiggy-boo locked. Land release is restricted there, so Belbo should end up coming out of this ok. Karratha is under slow land release too - can't wait for Mulataga latte strip to get underway in the mosquito & sand fly flats, what a joke.....first tidal surge and see ya later @#$%heads!!!!
For people who are still edgy about Karratha or Hedland, I would start looking at Broome again and Kununurra - but try to look at being creative (value add), buy land and build rather than buying retail, check out commercial opportunities or resi short term letting. Buy in costs are biggish but not obscene; get a JV happening, pool your buying power. There's opportunities galore if you get off your ar$e.
If anyone is still nervous...........GO AWAY!!........you don't belong in the bush.
Is that aircraft carrier of yours in the driveway or on a mooring Seabreeze?
I need my coffee....see ya.
Thanks MSL, Mick, Dazz........I don't do PC too well at all, but I detest the sugar coated society currently being spawned and don't subscribe to 'popular opinion'.
I remember reading some of your early posts when looking at exiting the rat race Dazz, particularly in WRT dealing with c$#@ smokers in the work place.......ditto right here. I'm always in trouble for telling F/wits that they are F/wits.
In the end they win & I lose, but I just feel better for it!
Ian.
I remember reading some of your early posts when looking at exiting the rat race Dazz, particularly in WRT dealing with c$#@ smokers in the work place.......ditto right here. I'm always in trouble for telling F/wits that they are F/wits.
In the end they win & I lose, but I just feel better for it!
Ian.
thanks for the clarification in that post michael
Great post Ian, very insightful and useful advice.
Thanks Seabreeze, that's making more sense now.
Good point, eliminating PM fees like that would be a good saving.
If you are a local or in the industry and/or have local contacts to reliable/reasonable/trusthworthy tradies then that's good, but if not, you may have to rely on a PM.
Though I don't think that a PM will have keeping costs low for you as a priority for them, given how many other properties they will be managing and that they will get their management fee regardless, so they may not necessarily help you.
Ian, Seabreeze, how do you manage this?
Here's some interesting success stories from Crawford Realty, some of these guys have their entire portfolios in Port/South Hedland:
http://www.crawfordrealty.com.au/content.aspx?page=Success_Stories
http://www.crawfordrealty.com.au/content.aspx?page=Success_Stories
It used to be in the driveaway but I no longer get the time... so it went to a more deserving home.
When we no longer require my employer's services, we'll be moving in to something with two hulls and sails that swings from a mooring...
While I'm up to my ar$e in alligators working for the man, a PM gets the privilege. When I no longer have to spend my time in this manner the PM will get the boot.
'Evening All,
In essence & as Jaycee has rightly pointed out, any PM or maintenance related questions are no different to people having IPs in other states / cities / towns......come on, it's not that hard and it's only The Great Wall in your psyche if you're timid or gay.
If you want peace of mind when you're on the other side of the country to a regional IP, you pay 8 - 10% in WA and wash your hands of the worry (other than the worry of whether your PM is any good or not - thats always a risk you take as 99.9% of them are useless. If you stuck a wooden handle up their @#se and push them along the floor, they'd still miss the dirty bits).
If you have a Woodside or a BHP corporate lease for example, you will generally liaise by phone or email with the company housing people - they're very good to deal with; so there's no need for a Real Estate Agency monkey - and you save 8 - 10% and a wooden handle.
If you have a GROH (Govt Regional Officers Housing) lease very similar deal and I assume similar for DHA (Defence) - once again no need for a monkey, no need for contacts or best friends gay uncle to check up on the house etc..
If you have a largish company (say Transfield, BGC, Hadens etc.) without a housing dept to manage their staff housing, then you have to make a choice. Do you employ a monkey at 8 - 10%, or grind your own organ :roll eyes:
If you have knuckle dragging rock apes, or beer swilling bogan boofheads (and their utes) as tenants, then I suggest that unless you are of the same IQ as your tenant, then you pay the 8 - 10% for a monkey and hope like @#$% the monkey does a good job.
***As I said before, it was very clear in my earlier post; because I have a corporate lease with Woodside on all properties, there is no need whatsoever for a PM. The leasing company does everything!!!
If you're in Sydney and you need to fix a tap in Port Hedland, you get on the inter-web, stop uploading naked pictures of yourself and the monkey, find a bloody phone number and make a call......it doesn't get any easier. If you're worried about paying through the nose, then I suggest you're in the wrong game; if you're going to quibble over $70 - $300 then you have some serious, serious anxiety & reality issues - make an appointment with a shrink, get some purple tablets & a cuddle.....and buy a Docklands apartment (you deserve each other).
It's the same no matter where your IPs are; you have to make our own decisions about tenants & managing!!!
Ian.
In essence & as Jaycee has rightly pointed out, any PM or maintenance related questions are no different to people having IPs in other states / cities / towns......come on, it's not that hard and it's only The Great Wall in your psyche if you're timid or gay.
If you want peace of mind when you're on the other side of the country to a regional IP, you pay 8 - 10% in WA and wash your hands of the worry (other than the worry of whether your PM is any good or not - thats always a risk you take as 99.9% of them are useless. If you stuck a wooden handle up their @#se and push them along the floor, they'd still miss the dirty bits).
If you have a Woodside or a BHP corporate lease for example, you will generally liaise by phone or email with the company housing people - they're very good to deal with; so there's no need for a Real Estate Agency monkey - and you save 8 - 10% and a wooden handle.
If you have a GROH (Govt Regional Officers Housing) lease very similar deal and I assume similar for DHA (Defence) - once again no need for a monkey, no need for contacts or best friends gay uncle to check up on the house etc..
If you have a largish company (say Transfield, BGC, Hadens etc.) without a housing dept to manage their staff housing, then you have to make a choice. Do you employ a monkey at 8 - 10%, or grind your own organ :roll eyes:
If you have knuckle dragging rock apes, or beer swilling bogan boofheads (and their utes) as tenants, then I suggest that unless you are of the same IQ as your tenant, then you pay the 8 - 10% for a monkey and hope like @#$% the monkey does a good job.
***As I said before, it was very clear in my earlier post; because I have a corporate lease with Woodside on all properties, there is no need whatsoever for a PM. The leasing company does everything!!!
If you're in Sydney and you need to fix a tap in Port Hedland, you get on the inter-web, stop uploading naked pictures of yourself and the monkey, find a bloody phone number and make a call......it doesn't get any easier. If you're worried about paying through the nose, then I suggest you're in the wrong game; if you're going to quibble over $70 - $300 then you have some serious, serious anxiety & reality issues - make an appointment with a shrink, get some purple tablets & a cuddle.....and buy a Docklands apartment (you deserve each other).
It's the same no matter where your IPs are; you have to make our own decisions about tenants & managing!!!
Ian.
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Thanks Ian,
Another question to all, I read that the resources sector is cyclical, if so, where are we now in the cycle??
Also, here's an interesting site with some articles of interest:
http://www.omegainvestments.com.au/free_articles_and_reports.html
Another question to all, I read that the resources sector is cyclical, if so, where are we now in the cycle??
Also, here's an interesting site with some articles of interest:
http://www.omegainvestments.com.au/free_articles_and_reports.html
