Port expansion plans will drive real estate values.

By Terry Ryder, 16th February 2012

The key to succeeding in real estate is understanding linkages. A residential property market in a capital city can grow because of events thousands of kilometers away. A regional town may prosper because of decisions made in Delhi or Seoul.

There’s no doubt the driving force of economic growth in the next five years will be development of new resources projects. There are projects with a combined cost of $400 billion in the pipeline, most of them still to start construction.
 
When they do, and when product starts to flow from the new mining enterprises, there will impacts throughout the economy.

One of those impacts will be demand for export facilities.

Cities and towns with existing or proposed export infrastructure will be among the greatest beneficiaries of the economic prosperity coming up in Australia.

Australia already has some of the world’s largest export ports. Newcastle is considered to have the biggest coal export facility worldwide and Port Hedland is a world leader in iron ore exports.

But unprecedented expansion is coming up.

Major development projects to create export port facilities are under way or in planning and jointly total around $75 billion. These are largely in the key mining states of Queensland and Western Australia, but with big projects also in South Australia, New South Wales and Victoria.

Towns and cities with these ventures in their backyards will receive considerable impetus from the economic activity and jobs generated. Pressure on housing prices and rents are a likely consequence.

Bowen, a town in North Queensland with a population of just 15,000, is having $17 billion spent on its export port at Abbot Point, as well as further billions to be invested in rail links from the Galilee Basin coal mines to the export facilities.

The expansion project known as X50 has attracted a 99-year lease from the Adani Group of India, which has paid $1.9 billion as part of its plans to mine coal in the Galilee Basin, transport it via its proposed rail link to Abbot Point and ship it to its power stations back home.

BHP Billiton and Hancock Coal are the preferred proponents for Terminals 2 and 3 at Abbot Point, while the Queensland State Government announced last year that it planned to “super-size” the port by advancing terminals 4 to 9 because of rising demand from coal miners.

Similarly massive investment is planned for the Port of Hay Point just outside Mackay, including the new Dudgeon Point facility said to entail investment of $10 billion,
At Gladstone, already targeted for $70 billion in LNG processing facilities, will receive further impetus from a $5 billion expansion of its port facilities to service coal miners.

The ever-expanding Newcastle port in New South Wales has proposals from three different entities to create coal export terminals, with investment totaling $8.5 billion.

But the biggest individual project is the scheme by Pilbara iron ore miners, headed by BHP Billiton, to spend $20 billion over eight years creating new export terminals at Port Hedland, the town with the steepest real estate prices and rents in Australia.

BHP Billiton, Rio Tinto, Fortescue Metals, Atlas Iron and others are all launching into colossal expansion phases in their iron mine projects in the Pilbara, with Port Hedland the key launch point for exports.

Other port developments inspired by iron ore mining in WA include the $6 billion Oakajee proposal at Geraldton and Rio Tinto’s $1.2 billion of its facilities at Cape Lambert.

The Oakajee project is having all sorts of problems getting started, largely because of cost escalation and because a key joint venture partner Murchison Metals has been unable to fund its share of the cost, leaving the other proponent Mitsubishi looking for other options.

But this port is strategically important and the WA State Government is clearly keen for it to happen, probably with an injection of capital from China.

Geraldton is the one mining-influenced regional centre in WA with affordable real estate and will take a major step forward if and when the Oakajee project starts happening.

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The driving force of economic growth in the next five years will be new resources projects. Projects with a combined cost of $400 billion are in the pipeline, most of them still to start ...

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