How Risky is Property Investment in Mining Towns?

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otea
Posts: 65
Joined: Wed Mar 31, 2010 10:35 am

How Risky is Property Investment in Mining Towns?

Post by otea »

Hello everyone,

Is it me or does it seems no matter what you're looking at in the news, every second word is 'natural resources boom'?

Now like Coke or Pepsi, people seem to prefer either the share market or property when it comes to investing and you very rarely see people mixing it up but be it property or shares, they all agree on the resources sector!

So with all this mining going on in Australia, what is the least risky way of entering the property market in the mining towns?

We all know and heard that it takes only 1/3 of the mining laborer to sustain a mine as constructing it in the first place. We've all heard the stories that sometimes several mining companies move into an area and that drives the rents up even more.

So how do we pick em when it comes to moving in on a mining town?

How much do the lenders allow for home finance in mining towns?
Any experts on this?

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fisher
Posts: 78
Joined: Wed Jun 24, 2009 4:25 pm

Re: How Risky is Property Investment in Mining Towns?

Post by fisher »

Hey otea,

It's interesting that you bring up that mining is the one thing both property investors and share investors can agree on! The thing is how property will fare in the mining towns is very closely related to what steps the mining operators will take to increase their shareholders and investors.

So you see what is happening here? The mining companies are impacting the property growth in a mining town and the economy in a mining town in return is driving whether other mining operations in the town will be able to make profitable returns or be buried under cost of operating in that town.

Here's another interesting fact to consider!

Affordable rents as provided by NRAS is probably most needed in mining towns like Geraldton and Darwin where the locals are getting absolutely smashed under the ever-increasing rents driven by the gold-rush!

The reason is NRAS developers are getting outbid by the speculative investing by property investors. It's the property gold rush era, and we shall see who will strike gold and who'll end up with fool's gold on this.

Any thoughts from anyone who actually resides in a mining town? How is this affecting you personally? Just wondering...

kathryn
Posts: 13
Joined: Wed Jul 21, 2010 7:06 pm

Re: How Risky is Property Investment in Mining Towns?

Post by kathryn »

Hi Everyone,

If you're a property investor, you need to have a strategy to build your wealth. If your strategy is to buy and hold and sit on that egg for retirement, then mining towns are not your best option.

However if you're looking for cash flow, mining towns may be your answer, but you need to get into that market before it becomes too expensive to buy, eg Port Headland, unless of course you have a spare million dollars in your pack pocket.

OR

If you're savvy enough and know how to research up and coming 'boom' mining towns and you're looking to build your equity then mining towns may be your answer. Once there is enough equity you can use that to invest somewhere else that will become a blue chip steady investment.

Ask other investors as well about their experiences, read magazines and be up to date about property, shares and natural resources.

I hope this opens questions for discussions.

Ella

Re: How Risky is Property Investment in Mining Towns?

Post by Ella »

Hi Kathryn,

Thank you for the helpful advice.

I'm not an active investor with tolerance for risk. In fact, taking risks gives me no pleasure at all. I really can't identify with the high or the adrenaline rush some people get through wagering on horses or other games of chance.

Having successful investments in mining towns is not purely a matter of chance however. I believe with some careful planning and agility once can get in and get out to avoid a loss when or if the mining town ever goes through a decline.

Also, there are mining towns that offer more than just the mining boom to attract people. There are lucky towns in Queensland that are close to the water, holiday destinations and other attractions that make them a good investment even if it weren't for the mining.

Is anyone here from Queensland or invested in mining areas that are also close to holiday spots? I would love to hear about your experiences!

Regards,

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otea
Posts: 65
Joined: Wed Mar 31, 2010 10:35 am

Re: How Risky is Property Investment in Mining Towns?

Post by otea »

G'day everyone,

I was fortunate enough to have bought property in in one of Queensland's top areas. I've had 16% rental yields in 2011 and now experts are anticipating the same amount of growth for 2012.

I purchased my units in West Gladstone, which has some liquefied natural gas projects going on at the moment. I was reading that there are 2 measures besides the auction sell rates that can tell you how well your area is growing. 1) 'days on the market' and 2) average discount.

It is still very much a buyer's market based on those indicators. So it ain't over yet and who knows when it will peak?

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