BHP Billiton's Olympic Dam project, near Roxby Downs, SA: mining companies have increasingly turned to mining camps to accommodate their workers, bypassing the real estate markets of local towns. Source: News Corp Australia
IT’S BECOME one of the biggest real estate crashes ever — and at the centre are a string of once booming mining towns where house prices have halved in two years.
Hotspotting analyst Terry Ryder said tumbling prices have left investors paying mortgages larger than the value of their properties and few can sell them.
“Not long ago, mining towns were a popular place for middle-income Australians to invest,” he said.
“I now get emails from those same property investors and they’re freaking out. Their mortgage payments are high, but the mining slowdown has meant they have no tenant to help cover it.”
Leading the crash is Queensland coal mining hub Moranbah, where the median price plunged from $740,000 in December 2012 to the current $310,000.
Similarly, WA port town Karratha, which services the nearby iron ore mines, has seen median prices in local suburbs such as Nickol slide from $900,000 in 2012 to $544,500 late last year.
Townhouses like these on Kingsmill Street in Port Hedland can fetch rents of $1,600 per week, but falling house prices brought about by the slowdown in the mining sector have meant they have become riskier real estate investments. Source: Supplied
Mr Ryder said mining towns were hit by a double whammy. The end of the mining boom sapped demand for property, while rampant building activity oversupplied local markets with housing.
“Developers probably got a little greedy. They saw the chance for huge profits, but didn’t pay attention to how many homes other developers were also building. They just kept building and now there are too many houses.”
Capital gains profits weren’t the only incentive for builders and investors to spend in mining towns. Between 2009 and 2012, mining town rents were the most expensive in the country, beating out prices in exclusive Sydney suburbs such as Vaucluse and Mosman.
231 Evans Street, Rozelle: inner city properties have produced far great capital gains than those in mining towns. Source: Supplied
Mr Parker said he had observed how a low supply of properties, coupled with high demand for homes, had caused rents and prices to surge in the years preceding his purchase. But that environment quickly changed.
“The mining companies used to pay rent for their workers and the thinking was ‘they have deep pockets, they’ll pay anything’. Of course, they didn’t,” he said.
Staggering rents were part of the reason mining companies like BHP Billiton began operating mining camps — self-contained housing nearby mines — that now circumvent the local housing markets of surrounding towns.
35 Clements Street in Queensland coal mining hub Moranbah: houses like these used to attract prices significantly higher than they do now. Source: Supplied
Mr Parker said he had discovered that “mining towns are not popular places to live and most workers prefer staying in capital cities and flying back for work.” This has kept his property vacant for long periods.
BIGGEST MEDIAN PRICE FALLS IN MINING TOWN SUBURBS
Dysart, Qld: $569,000 (2012) — $120,000 (2014)
Moranbah, Qld: $740,000 (2012) — $310,000 (2014)
Nickol, WA: $900,000 (2012) — $544,500 (2014)
Port Hedland, WA: $1.59 million (2012) — $970,000 (2014)
Blackwater, Qld: $452,500 (2012) — $280,000 (2014)