Busted suburb again labeled hotspot: The Moranbah debate

Mining town Moranbah is the epitome of a typical boom-bust story, with the concept of investing in the area out of many investors’ depth.

At one point, rental yields were soaring at around 20%, a figure more reminiscent of overseas markets than anything typically seen in Australia. However, the future’s certainty even at that time – in 2012 – was questioned.

In 2013, observer Terry Ryder said that the use of fly-in, fly-out (FIFO) workers was removing pressure on local rents and prices, with BMA (BHP-Mitsubishi Alliance) planning to have just FIFO workers on two of the new mines in the basin. Workers fly or drive in for their shift, stay in temporary camps, and return home.

“Moranbah rents and prices are falling right now, with residential vacancies up around 7%. In nearby Dysart, vacancies are approaching 15% and rental yields, previously above 10%, are now down around 5%,” he said.

Meanwhile, John Wood, of Moranbah Real Estate, said that the market was flat and slow. But as a long time resident, while admitting that prices had fallen, said that it was “at the point where it can’t fall any further”.

Omega Investments’ Flynn de Freitas, however, believes that the market is on the cusp of the “next property boom”. This is due to billions of dollars’ worth of projects in the pipeline that will "secure the town’s future".

Interestingly, this was in a report commissioned for Matson Apartments (pictured below), where it noted that the market was reaching the floor and is setting itself up for another boom.

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“The Moranbah property market is poised for its next boom with over $17.2 billion in major infrastructure projects planned and $5.6 billion of these approved within a 60 kilometre radius of the township,” the report said.

“While Moranbah has faced a range of challenges in the last two years – including industrial strikes, extraordinary rainfall events, a ‘rental freeze’ by a major employer, a substantial drop in coal prices leading to large scale redundancies and a sea change of locals moving out of town – there are signs the market is turning as nearby coal mines return to full production and new mining projects start construction.”

De Freitas describes Moranbah’s future as ‘secured’ by a worldwide demand for metallurgical coal, a demand which is expected to rise around 20% by 2018.

“Moranbah’s economic future is looking brighter than ever,” he said.

“This large number of new mining projects in the Moranbah region is underpinning strong population growth forecasts, with over a 45% increase in the town’s population expected in the five years to 2018.”

At 13 Bacon Street, Matson Apartments, a 30 unit development with a ground floor commercial retail space, is in a proposed dining and entertainment precinct.

The units, averaging 91 square metres, are priced from $447,500 and have a $700 per week leaseback by Direct Hotels & Apartments option.

The developer, Don Moffatt from Moffatt Property Development Group, said that the town is just “misunderstood”. He also says that the yield and rental guarantee have not been built into the price.

“It is an independent offering from Direct Hotels & Apartments who through a subsidiary have purchased the management rights to Matson Apartments,” he said.

“Not only will residents receive exceptional on-site professional management, investors will receive above market returns.”

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The expectation is for Matson to be completed in late-2014.

With a vacancy rate currently recorded at 9.4% by SQM Research, and more supply coming onto the market, some are asking whether this boom will actually eventuate again.

jduke@propertyobserver.com.au