Qld region emerges from under the radar

By Terry Ryder, 9th February 2012

It’s difficult to imagine a Queensland region with higher levels of investment than Gladstone but the Mackay-Isaac-Whitsunday (MIW) region has managed it.

The latest figures from the Regional Economic Development Corporation record projects totaling $107 billion.

The value of projects in this region increased 32 per cent in the second half of last year, with the announcement of new export terminals and rail links.

This region, perhaps best known to Australians for the tourism aspects of its economy, is thriving because of its links to the coal industry.

The Isaac part of the area, the Isaac Regional Council area, includes a series of mining towns such as Moranbah and Dysart.

Despite talk of the carbon tax killing industries like coal mining, these Bowen Basin towns are bustling with expanded activity while to the west the Galilee Basin is fast becoming the new boom mining province of Australia.

The MIW region has two key export ports, Abbot Point near Bowen and Hay Point just outside Mackay. Both are targeted for massive expansion and both are the destination for new rail links built by coal miners.

The State Government has decided to “super-size” the Abbot Point facility, adding another six export terminals. This is inspired by the development of plans for several multi-billion-dollar mines in the Galilee Basin west of Emerald, where Queensland entrepreneur Clive Palmer and two Indian entities are evolving plans, which include rail links to the coast and export facilities.

One of those Indian entities, Adani Enterprises, owns power stations in India and plans to spend $10 billion in its Australian coal venture. It seeks to control every step of the process from digging up the coal to delivering it to the energy facilities back home.

This means ownership of the mine, the rail link, the export facility and even the ships. It will spend $3 billion on its rail network alone, with one link to Abbot Point where it has paid the Queensland Government $1.9 billion for a 99-year lease on a coal export facility, and the other to the location near Mackay where its other export terminal will be built.

The Australian reported in August 2011: “The scheme is one of the most ambitious vertically integrated resource developments ever proposed in Australia … It will make Adani India's largest single investor in this country.”

While our major cities generally recorded down years in their residential markets in 2011, the opposite was happening in the towns of the MIW region.

Moranbah, which is a contender for the title of best long-term growth record in Australia (an average of 28 per cent per year over 10 years), grew its median house price 16 per cent last year. Typical houses now cost $530,000 and tenants have to find more than $1,000 a week to live in them.

Dysart prices rose 11 per cent last year and this coal town is another title contender – an average annual growth rate of 31 per cent, according to Australian Property Monitors. The median house price not stands at $465,000 and typical rents are close to $1,000 per week.

I am not, however, an advocate of investing in houses in mining towns. The high prices and rentals in these places are dependent on consistent long-term prosperity in the one industry that defines their existence, mining.

The mining projects in both the Bowen and Galilee basins have long-term horizons but, as we saw post-GFC, there can be major hiccups along the way – periods during which prices and rents can fall sharply.

The safe and sustainable way to prosper as property investors is to target regional centres which benefit from resources activity but do no depend on it.

Mackay is a good example. It is a regional centre with critical mass and plenty going on its economy other than resources-related activity, including agriculture and tourism.

Mackay, population 90,000, is the capital of the MIW region which has a total population of 180,000. It’s well-situated to thrive from the upturn in resources activity, with lots of businesses that service the mining sector and also plenty of residents who live in Mackay and work in the mines.

The expansion of port facilities and development of new rail links with create lots of new jobs in and around Mackay, as well as in Bowen.

Mackay also offers the benefit to investors of being cheaper than those high-priced mining towns, particularly with apartments priced from $250,000 to $350,000. The suburbs of Mackay all have solid track records of growth, ranging from 10 to 13 per cent per year over the past decade.

One part of the MIW region that doesn’t shape up well for property investors is the Whitsundays market. Like so many Queensland markets that are popular with tourists and sea changers, the Whitsundays record of capital growth is poor. According to the Real Estate Institute of Queensland, the median unit price has grown just 4 per cent in the past five years.

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