In response to yesterday’s breaking news about the Moranbah rental crisis, a number of property groups claim to have cautioned investors 'months ago' of the risks associated with areas primarily dominated by mining.
Speaking to Smart Property Investment, NextHotSpot’s Luke Berry explained that they had been cautious of Moranbah since August 2011 when they listed it as a ‘BlackSpot’.
Mr Berry explained that when they did list it as an area to avoid, they received criticism from both investors and other property groups.
The reasons behind his initial concern included the reliance investors were putting on stories of record yields and endless growth.
“It seems many didn't consider the long term volatility of a market like this one and in light of what’s going on with the rental freeze we are quite proud we held our ground,” he said.
"Our biggest concern last year, and it still is today, is that the Moranbah property market lacks diversity and its growth has been fed and will continue to rely on a 'single large employer',” he said, explaining that he advises avoiding ‘One Trick Pony’ areas that are easily manipulated by big companies.
“Mining should be treated as a bonus,” he said.
“Our tip to investors is to focus on areas in this region with more diversity, ones with a lower price point and that have more competition for rentals, not just the big faceless corporates.”
Rumours of a 5,000 man camp in the region is another reason Mr Berry calls the area a high risk investment.
One investor, Lucy [surname withheld], purchased a three bedroom, one bathroom 1970s property in Moranbah in late February that is still untenanted.
Lucy told Smart Property Investment she did her due diligence on the Moranbah market in the final months of 2011 before putting in an offer this year.
“I found a property through Moranbah Real Estate and put in an offer in January. It was accepted that day,” she said.
“The advertisement said the property would achieve $2,000 and I was told by Moranbah Real Estate that it would achieve between $2,000 and $2,200 a week.”
She decided to use Ray White Mackay Beaches & Moranbah as property manager.
“In the first week of March [I was] told by Ray White that Peabody Energy, one of Ray White’s main tenants, were no longer renting properties in Moranbah.
“The two emotions I’m feeling right now are sick and terrified,” she said.
Moranbah Real Estate said that untenanted property will not sell, nor will that which is achieving a yield under 11 per cent, Lucy explained.
“If the property can’t be tenanted or sold the very last thing for us would be bankruptcy.”
Market Review information provided by Ray White said that, on average, there were 225 sales per annum, marking Moranbah as a “competitive market.” In the 12 months to November 2011, $126 million worth of real estate was sold.
Positive Real Estate’s Sam Saggers, however, explained that it was an obvious “not-spot” as picked in his July 2011 list.
This is not a new occurrence, Mr Saggers said, and no doubt will happen in the future.
“The reality is Moranbah value increase in property has been a story told time and again,” Mr Saggers said.
“House prices of over a million dollars in towns that offers nothing more than employment in the coal or iron ore or gas industries. Surely there will be a tipping point!”