Article supplied by Crawford Realty
National positive property specialist, Crawford Property Group, has named its top regional picks for the next six months for investors seeking top cash flow and capital gains.
Moranbah, Karratha and Derby are turning full cycle after undergoing a correctional period and a softening of investment from the resources sector.
With commodity prices bouncing back and renewed investor confidence from the federal election, these towns are projected to deliver solid capital growth and exceptional cash flow as markets trend upwards once again.
Discounts are still available meaning investors have the opportunity to access these markets at low prices, maximising capital growth.
Change in median price 12 months to date: -8.6%
Change in median price 5 years to date: 80.8%
Rental yield (new property): 8%
(Source: RP Data, Crawford Property Group)
Moranbah remains the number one mining town in Queensland’s Bowen Basin with 20 operational mines within 80km of the town along with one of Australia’s largest CSG projects.
The Moranbah region has undergone rapid population growth in recent times, expanding from just over 7,000 (2006 census) to over 10,500 in 2009 (Isaac Region Council).
Massive project pipeline totaling more than $13 billion
The opening of the new $1.1 billion Goonyella to Abbot Point rail link north of the town has increased the capacity of coal exports in the area by a further 50 million tonnes a year.
Three new coal projects are now under construction totalling more than $6 billion. The construction workforce numbers for these projects total more than 2,400 and operational workers will total more than 900.
A further three projects are undergoing expansion (total $1.25 billion) with expected construction and operational workforces of more than 1,000 and 300 respectively. And a massive 10 new projects worth $6 billion are in planning, indicating construction and operational workforces of more than 3,000 and 2,500 respectively.
Growing workforce and limited land is once again creating market pressures
The town’s growing workforce, and its limited land availability due to surrounding mining leases, is once again putting pressure on housing supply.
While the Moranbah market has been in correction mode over the past 12 to 18 months after unsustainable growth in 2011/12, its strong historical growth patterns are expected to be repeated as it reaches the end of its current cycle.
The major resource companies and government forge ahead with spending in excess of $13 billion and increasing the area’s current coal production from 100 million tonnes annually to a phenomenal 200 million tonnes per annum by 2020.
Now is the perfect opportunity for astute investors to secure brand new homes with high tenant appeal at attractive prices. Securing these properties ahead of the projected influx of highly paid resource sector employees and their families relocating to Moranbah and fuelling demand for houses will maximise investment returns.
These well-located properties feature a high quality finish and are estimated to achieve positive cash flow returns of 8% per annum in today’s market.
Change in median price 12 months to date: -25%
Change in median price 3 years to date: 5%
Rental yield (new property): 9 – 10%
(Source: RP Data, Crawford Property Group)
Karratha has the benefit of several mining industries and an active tourism industry. It is also the focus of the WA government’s ‘Pilbara Cities’ vision, which aims to increase the town’s resident population by 250% by 2035!
Karratha’s population grew at a rate more than five times the national average between 2006 and 2011 (ABS) and the Pilbara Cities initiative and ongoing industrial growth will maintain this momentum, transforming the town it into a vibrant ‘City of the North’.
Huge 40 year+ gas projects underway and major infrastructure planned
Chevron’s $US52 billion Gorgon gas project is more than half way to completion and is expected to deliver first LNG cargoes by early 2015. The project is one of the world's largest natural gas projects and the largest single resource natural gas project in Australia's history.
Woodside’s $15 billion Pluto LNG project was completed in 2012. An expansion of Pluto from one train to two is planned with Woodside to commence further exploration in the Pluto offshore area in early 2014.
With the lifespan of Pluto estimated to be 40 years and Gorgon at least 40 years, these two projects alone will contribute to a constant demand for housing.
The Anketell port and strategic industrial area is another major project in the pipeline for Karratha. There have been delays due to funding but the project was recently granted environmental approval and is critical to the development of three major iron ore projects totalling $16 billion.
These projects would bring in a combined construction workforce of 10,300 and operational workforce of 4,350.
Increasing demand for rentals, high yields
With the lifespan of the Pluto project estimated to be 40 years and Gorgon at least 40 years, these two projects alone will contribute to a constant demand for housing.
Increasing leasing activity has now stabilised rents and yields remain well above the national average at around 9 – 10%. House prices have remained flat over the last quarter indicating the market is bottoming out. Now is an opportune time to buy before progress with the current pipeline of projects sparks growth.
Overall, Karratha’s existing and planned projects and significant government backing maintains its excellent cash flow opportunities and long term growth prospects.
Change in median price in last year: 4.6%
Change in median price in past five years: 52.7%
Yield (new property): 8%
(Source: RP Data, Crawford Property Group)
The port township of Derby is the major health and administrative centre for the Kimberley region. It also services the adjacent airbase, the numerous cattle and pastoral stations, and various resources projects spanning LNG, iron ore and diamonds.
The Kimberley’s government and iron ore service centre
Hundreds of new government and private workers have come into town in recent years to meet the town’s growing administrative, health, education and correctional service’s needs. Rents and house prices have been driven up rents as the town struggles to accommodate this growth. Its population of approximately 4,000 is expected to grow 14% by 2016 (WA Government).
Derby and its port also services the Kimberley’s iron ore hub – three offshore islands (Irvine Island, Cockatoo Island and Koolan Island, the latter two being actively mined) in the Yampi Sound.
Four major mining projects are planned for the area (Lennard Shelf lead-zinc project, Duchess Paradise iron ore project and Clara Hill nickel project) which intend to export from Derby’s port facilities. The fourth (Irvine Island iron ore project) will use Derby as its supply base.
These projects total more than $1.6 billion and would require a construction workforce of more than 600 and an operational workforce of more than 700.
The proposed $550 million Point Torment Supply Base is another major project flagged for the area.
One of Australia’s tightest markets with long term government leases
Derby is one of the tightest property markets in Australia, suffering chronic accommodation shortages not only from flow effects of the commodities boom but from its unique role as a correctional and detention centre hub. Because of its unique role, property investors in Derby have the attractive opportunity to secure a 3 to 5 year WA Department of Housing lease.
According to research, the vacancy rate of Derby has been less than 1% for the last seven years except for three brief occasions where it rose to a maximum of 1.5%.
New residential development has increased the supply of housing in the town but land availability will continue to be restricted with the town locked by tidal mud flats and Native Title.
For more information, please download a free positive property report.
The above information is supplied by Crawford Realty.
Disclaimer: while due care is taken, the viewpoints expressed by contributors or sponsors do not necessarily reflect the opinions of Your Investment Property.
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