Whyalla's $8 billion investment boom

Posted on 12/04/2012  

It's easy to get a bad reputation and extremely hard to lose it.

This can affect property investors, who often have attitudes to locations based on flimsy and outdated information.

Ipswich City continues to be stigmatized as a downmarket cluster of bogan suburbs, an assessment that's at least a decade out of date. Ipswich is one of the most progressive municipalities in Australia and, in terms of long-term capital growth rates, eight of the top 10 suburbs in the Brisbane metropolitan area are in Ipswich.

Many Brisbane residents still regard my home town, Maleny in the Sunshine Coast Hinterland, as a haven for hippies and alternatives where everyone grows illegal vegetables.

It may have been that 20 years ago. These days it's more a middle-class enclave for retirees and tree changers. But one of my friends calls me "feral boy" because I live there.

I have a colleague who regards Whyalla in South Australia as a no go zone because the last time she visited there she saw some relocatable homes - and, apparently, "the banks don't like them".

I've spent quality time in Whyalla twice in the past four months and the only relocatable homes are in caravan parks. The housing stock in the town is a mixture of new houses (the Ocean Eyre estate alone has built 200 new homes) and older style dwellings, including former Housing Trust maisionettes which still sell readily and rent easily.

But let's not let the facts get in the way of an entrenched attitude.

The essence of good investing is intelligently assessing a location's future, not its past.

The recent past can give some comfort to buyers - such as a healthy long-term capital growth rate - but it doesn't necessarily inform the future, just as a chequered history can be irrelevant in a town that’s evolved to better things.

Those who focus on the past would never buy in Newcastle and the Hunter Valley, despite the current vibrancy and confident future based on $20 billion in infrastructure projects, because it's history includes industry closures and high unemployment.

Whyalla's past is similarly topsy-turvy but its present and its future renders its history irrelevant. Towns can reinvent themselves: Newcastle has and so has Broken Hill, which nevertheless retains an unwarranted reputation as an ageing mining town.

Whyalla may be known as a steel manufacturing town but that's last century's news.

The context of Whyalla's prosperous future is as global as it is local. The new growth economies want Australian resources to fuel their industrialisation and South Australia is now the third big resources state in the nation, although few realize it.

Mines, including iron ore and uranium enterprises, are mushrooming across the Eyre Peninsula.

The $30 billion expansion of Olympic Dam is under way (not officially but major contracts are already being handed out).

Mining can now occur in the Woomera Prohibited Area and that in time will make Olympic Dam look puny.

South Australia needs a major new export port and the State Government has given its development " major project" status.

All of these events bring major impacts to Whyalla.

A few years ago Whyalla was abuzz with economic activity and real estate demand because of a single project: the $300 million Project Magnet expansion by OneSteel (now known as Arrium because it has switched its emphasis to mining).

Today Whyalla has a dozen enterprises as big as Project Magnet on its books - many of them considerably bigger.

They total $8 billion in capital investment. Whyalla needs only one or two of them to proceed to become South Australia's boom town.

It's not all resources related. Whyalla services other significant industries, including agriculture, tourism and aquaculture. It has two export ports, both about to become larger.

Around $80 million is being spent upgrading its hospital and there is a major expansion of the Westland shopping centre under way to create the biggest retail centre in regional South Australia. New short-term accommodation is being built, including a Quest apartments complex.

Residential vacancies are below 2 per cent and rents are rising. This situation pre- dates the start of work on projects like the $1 billion rare earths complex, BHP Billiton's $700 million desalination plant and the new $600 million export facility at Port Bonython.

I see Whyalla in terms of Queensland's Gladstone ten years ago.

South Australia already has a Gladstone (a small town north of Adelaide) but it's about to get another one, because Whyalla is soon to become to South Australia what Gladstone is to Queensland – the industrial muscle town that does all the heavy lifting.


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