viewpoint volatile pricing in mining towns september 2015 cbre research1 jacob fong senior research...
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VIEWPOINT
Volatile pricing in mining towns
September 2015 CBRE Research
1
Jacob Fong
Senior Research Analyst
Australia Research
© CBRE (AUS) Pty Ltd |
Australian Regional Residential Markets
Australian Regional Residential Markets
Figure 1: Isaac Regional Council median house price and commodity prices
Source: CBRE Research; Reserve Bank of Australia; RP Data, August 2015.
CBRE Research highlighted the risks of investing into mining towns in 2013 in the Viewpoint entitled Resource sector and residential markets: strong gains but where does the risk lie? Transient populations that are almost solely reliant on resource project employment experience large swings in demand. We are now seeing the flipside of the cycle as resource spending declines and there isn’t a clear growth driver to replace it. CBRE Research has undertaken a review of recent transactions to show the degree of pricing volatility in mining towns.
Sam Reilly
Senior Research Manager
Australia Research
-66.1%
Q4 2012 to Q2 2015
73.4%Q1 2012 to Q1 2015
70.6%Q3 2010 to Q2
2015 36.7%
Dysart
Moranbah
Clermont
Peak to current house sales
VIEWPOINT
2
Queensland and Western Australian mining towns sharing similar price falls
Isaac Regional Council in Queensland has been highly exposed to resource
spending. It covers many of the coal mines within the Bowen Basin and the
residential market has experienced substantial price volatility as demand levels
have increased rapidly and then contracted very quickly. Recently, mining
companies have been scaling back employment requirements (e.g. Isaac Plains coal
mine with 300 workers closed in 2014 and sold for $1 in 2015). Rental demand,
previously fuelled by resource employment has now fallen and plunging rental
returns have seen capital values contract 70% from those achieved at the peak of
the market in 2012 (Figure 1). Mining towns in Western Australia have seen similar
price reductions (Figure 2), Karratha Council recorded median house prices at
$810,000 in 2012 but have since declined 44% to $450,000 (31% fall in past year)
as resource employment levels continues to slow.
The construction led jobs boom in resource rich areas of Australia has passed. $65
billion in mining projects across Australia have been completed over the past two
years and have now transitioned to the export phase which is far less labour
intensive. As global economic conditions drive commodity prices down 40% from
2012 levels, the chances of a rapid rebound in new resource projects being
commenced is low and therefore the outlook for residential markets in mining towns
is unlikely to enter a new growth cycle over at least the medium term.
September 2015 CBRE Research © CBRE (AUS) Pty Ltd |
Australian Regional Residential Markets
Figure 2: City of Karratha median house price and commodity prices
Source: CBRE Research; Reserve Bank of Australia; RP Data, August 2015.
-44.4%
Q1 2011 to Q2 2015
51.4%Q2 2008 to Q1
2015 46.3%
Q1 2010 to Q2 2015
40.1%
Millars Well
Port Hedland
Baynton
Disclaimer: Information contained herein, including projections, has been obtained from sources believed to be reliable. While we do not doubt its accuracy, we have not verified it and make no guarantee, warranty or representation about it. It is your responsibility to confirm independently its accuracy and completeness. This information is presented exclusively for use by CBRE clients and professionals and all rights to the material are reserved and cannot be reproduced without prior written permission of CBRE.
VIEWPOINT
Australian Regional Residential Markets
For more information regarding this ViewPoint, please contact:
Jacob Fong
Senior Research Analyst, Australia Research
Level 3, 1 Eagle Street
Brisbane, QLD 4000
T 61 7 3833 9800
Sam Reilly
Senior Research Manager, Australia Research
Level 3, 1 Eagle Street
Brisbane, QLD 4000
T 61 7 3833 9739
To learn more about CBRE Research, or to download our reports visit
cbre.com/research
CBRE Global ResearchThis report was prepared by Australia Research team which forms part of CBRE Global Research—a network of preeminent researchers who collaborate to provide real estate market research and econometric forecasting to real estate.