Real Pain - Australian Mining Towns

It is so hard to show restraint when everybody else is making bags of money in a boom. It was at a stage when the money felt guaranteed and you were a boring old naysayer for not joining in.

The great investors have the strength to say no even when their heart is screaming yes. It is hard though.

I looked and looked at these mining towns. Just really thankful I listened to my training and stopped buying with the excitement.

I feel so sad for people that were trapped by the high commission financial advisors and agents who promoted these investments.

 

The great investor got the timing right and purchased when properties in Karratha could be purchased at 200k and sold at $1m prior to peak
Not me, I did not have the courage

 

Me neither. At the time if you bought there you were considered an idiot.

The mine was going to shut in 5 years and the place would shut down.

Nobody wanted to touch the place.

And selling at the top? You would have been an idiot. The yields were so strong that you had to stay a little bit longer....

Sadly the story will continue somewhere else - same dog different hat.

 

That not really investing but more like timing and gambling, good investors don't need to time, they buy on concrete research and number, they can survive all cycles up and down, make money along the way in all cycles and let time and compounding be your friends.

 

Property does not continually rise, it falls/corrects and goes sideways

Yes you can hold forever if you can source finance and service debt.

However we are in a new world where servicing debt will be much more difficult moving forward and strategies to maximize opportunities will be key imo

When you buy and hold you are a speculator and more risk when markets correct

All to their own, however there are compelling reasons why timing is superior strategy if you get it right

 

Fast forward today..... would be interested to know what is happening.

Did anyone have the courage to buy in??

MTR

 

The long term locals would be thinking it's Xmas.

 

as long as they can rent the properties out. There would be massive oversupply and prices have dropped perhaps 60% but so have rents

MTR

 

I wonder though, from an investment point of view if mining town risk was your thing..
Wouldn't it be safer just to invest in Perth, Townsville, Mackay or Darwin?

At least with these places you get far more than just mining...and all the infrastructure that comes with a proper city?

 

Not for me, risk vs reward? But perhaps there are some that have made it work??

 

Sure investing would be tough going...but if you want a place to you know, live in....it'd be wonderful.

 

Part of the issue with Karratha, Hedland and possibly Newman was the fact that the mining boom lasted such a long time , Karratha was always an expensive place to buy.
and its about 1700km north of Perth.
Constuction costs are high in all the towns as everything is brought up from Perth, they have to compete with the mining companies to keep staff ,and all the housing in the area has to be built to withstand the cyclones that frequently pass through the area.
It became a political issue due to the fact that rents were so high, vacancy rates so low and the longevity of the boom.
Many town based positions(non mining) in these towns could not be filled due to the cost of housing, and that included essential service staff (Nurses,Police Ambos etc)
Banks could not get staff to go up there(including the managers),same with the other town based positions such as the supermarkets,fast food outlets,doctors and other workers in retail ,hospitality and catering.
The mining companies had a lot more money and could pay exorbitant rates for accommodation.
In the end the government had to step in and start building more accommodation,but that takes time, and by the time a lot of it was built,things were starting to slow down , especially in Karratha, where a lot of nice apartments had been built.
The mining & oil and gas companies also like to keep their workers(FIFO) in their own camps, as they have a lot more control over them, they dont want them driving 40 minutes(in company buses) every day from Karratha,many of the workers do not want to live locally , and the big companies are more than happy to keep them in the mining camps outside of town and away from distraction like pubs etc, many of the camps will only sell you a few cans of beer a day , and are opened before you leave the bar,by 9.30/10 pm they are closed,drinking outside after 10pm near the accommodation areas is generally not tolerated , and in many cases your boss would get an email the next day, they don't have that sort of control if you live in town.
So these camps continue , with a FIFO workforce.

 

And many FIFO workers live interstate.

Friend’s son works in mining but has always lived near Brisbane. Contemplated moving to Perth around five or so years ago but the high house prices put him off - lucky for him as prices subsequently crashed.

And his flights to and from Perth have a plane half full of FIFO workers heading on to all parts of WA from the Pilbara to the Gold fields.
Marg

 

I was in the Quantas Club at Brisbane Airport one Monday at 7.00am you could hardly get to the breakfast items for the guys in orange overalls

 

I reckon you hit the nail on the head here, MTR.
I have a client who bought two townhouses in Emerald, QLD during the boom.
All was fine while the corporate rental agreement lasted, but now rents have dropped by 75%
And that's if you can get a renter.
Who wants to live in a townhouse in Emerald when there are so many 4 bedroom homes up for lease?
And the worse of it is that although the agents are saying the properties are worth $100k (bought for $300k) there's no-one buying.
So maybe they're really worth nothing at all??
Disastrous transaction!!
Good to learn from and remember when the next boom comes around.

So my question is: when do others think the next mining boom will be? 10 years? 20 years?

 

I have a client with two in Hedland, just given in and called bankruptcy. 2 houses with a current debt of 1.3mil and current value of around 350K. Apparently stock is selling very quickly up there right now to owner occupiers.

 

I currently live in the Pilbara, was here in 2012 and it was crazy as far as finding accommodation, real estate prices etc....even the caravan parks were absolutely chock a block

What a different scenario it is today, the caravan park at Tom Price is completely empty

I considered buying a place in Port Hedland, but have decided against it. Properties are selling, and rents have moved up a bit, but check out the amount of rentals on the market...it’s mostly locals buying a home

As for when will the next boom will come along for the Pilbara...China has/is building cities etc like nothing ever seen before, plus there is the one belt one road initiative, so the demand is still there for iron ore, however most of the major construction on the mines has been completed, and now it’s just a matter of loading boats for China.

In my opinion, there will only be another boom for the Pilbara when another country goes ballistic on building infrastructure and buildings like China has.

 

Now youse talkin' where abouts??

 

Awesome....maybe I should somethin' now.....in Hedland....

 

In Gladstone I could get an 800sqm block house for under $200K. Tempting.