MORANBAH

The Coal Hub of Australia | Issue 15

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Moranbah - Positive Property Report | Issue 15 1 INTRODUCTION

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Moranbah - Positive Property Report | Issue 15 2 View Positive Properties Now CONTENTS

Moranbah at a Glance 4

Population and Demographics 6 The town’s demographic 6 Isaac regional council 7 The Resources Pipeline 9

Infrastructure Investment 10

Property Market 12 Current state of the market 13 A set of circumstances lead to a hiccup 14

So Where to for the Market? 15 Now is a good time to invest 16 Tenants 16 Demand for Moranbah’s resources to strengthen with urbanization 17 Demand for coking coal 19 Demand for thermal coal 20 Commodities boom isn’t over 20 So what does this all mean for property investors 21

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Moranbah - Positive Property Report | Issue 15 3 View Positive Properties Now MORANBAH AT A GLANCE

Established in 1969, Moranbah is one of the youngest towns in Queensland. Situated on the Peak Downs Highway between Mackay and Clermont in the State’s Isaac region, Moranbah is a coal mining town created specifically to cater for the miners working in the surrounding mines and their families.

The town was rapidly expanded in the late 1970s by the Utah Development Company in order to house these mine workers and as coal mining has expanded in the region, Moranbah has grown and developed significantly. It currently caters for a population of around 23,000, and as the service centre for the local workforce employed in the mining sector, the town now it has an abundance of modern facilities. For a small regional town it offers a diverse range of sports and entertainment facilities, including a skate park, library, public swimming pool, rugby league, AFL, hockey, tennis, off-road racing, motocross and a BMX club.

Moranbah is considered the largest mining town of the Bowen Basin, directly servicing 12 mines within 50km of the township – more mines than any other town in Australia. These include the Peak Downs Mine, Goonyella Riverside Mine, Broadmeadow Mine and Moranbah North Mine as well as several other smaller mines in the region.

Moranbah has seen substantial growth in property prices over the years, leading many investors to secure property in the town over the last decade. While values and rents were rising steadily for years, a series of events in 2012, both market and industry-based resulted in a retraction in occupancy rates and market pricing in the town.

In 2014, with greater activity being reported by real estate agents on the ground in Moranbah, and with the town gearing up for a busy year, now is the opportune time for investors to be entering the market.

Prices are currently cheaper than they have been for a long time, but with population growth forecast to continue and mining still going strong, with plenty of demand for resources globally, the scene is set for a rebound for Moranbah’s property market in the not too distant future.

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Moranbah - Positive Property Report | Issue 15 4 View Positive Properties Now POPULATION AND DEMOGRAPHICS

Population growth – past and future Due to the growing amount of investment in the coal mines surrounding the town Moranbah is a fast growing community. Its population has risen steadily, from around 7,500 in 2006 to nearly 9,000 as at the 2011 Census, according to data from the Australian Bureau of Statistics (ABS). That’s a 20 per cent rise in five years, or four per cent growth per year. In addition to its permanent population, it also has a large fly-in fly-out (FIFO) population, which populates the local housing market.

The population of Moranbah is expected to continue growing. Isaac Regional Council’s population is projected to increase by over 62 per cent by 2031, from 23,000 people to 37,000 people (see Table 2 and Figure 3 below) – and most of these people are expected to reside in the council’s regional centre, Moranbah.

Source: Queensland Government - Office of Economic and Statistical Research Page 5

Moranbah - Positive Property Report | Issue 15 5 View Positive Properties Now The town’s demographic The majority of people living in Moranbah continue to be mine workers. According to the 2011 Census, 40 per cent of workers identified as being in the coal mining industry, and others are in occupations that service these miners and their families living in the town. Following coal mining, just over four per cent of workers identified themselves as being in school education and 2.7 per cent identified as being in the cafes, restaurants and takeaway food services industry.

Furthermore, of those employed, nearly a quarter were identified as being ‘Technical and Trades Workers,’ and a further 25 per cent identified themselves as being ‘Machinery Operators and Drivers’, demonstrating the heavy bias towards working in the mining industry in Moranbah.

At the time of the last census in 2011, only two per cent of Moranbah’s population were unemployed, compared to 6.1 per cent for Queensland, and more than 70 per cent worked full time, compared to just 60 per cent for Queensland. Moranbah: Occupation of employment Source: Australian Bureau of Statistics In addition, the median age of residents was found to be 29, much lower than the median for Queensland of 36 and the median for Australia of 37. This indicates that many people have moved into the area to work in the mining industry, with the older demographic choosing to reside elsewhere.

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Moranbah - Positive Property Report | Issue 15 6 View Positive Properties Now Isaac Regional Council - Queensland’s economic powerhouse Moranbah is located in a region known as the economic powerhouse of Queensland – the Isaac Regional Council, which is located halfway between Cairns and Brisbane. This area covers 58,862 km2 and incorporates several other towns including Clermont, Coppabella, Dysart, Glenden, Middlemount, Moranbah, Nebo and St Lawrence.

The Isaac Region is underpinned by one of the largest coal mining deposits in Australia, and it supplies Queensland with around half of all coal produced, as well as three quarters of the total value of coal exports. According to the Isaac Regional Council, the region generated in excess of $18.1 billion in economic value in the 2009 2010 period and is one of the fastest growing economies in Queensland due to the growth that has been experienced in the mining and exploration sector.

With a Gross Regional Product (GRP) of over $9 billion for each of the last four years, the Isaac Region has proved very resilient despite a pullback following the global financial crisis - a fact evidenced by a persistent low unemployment rate – which as Isaac Regional Council, generated in at June 2013 was sitting at 1.5 per cent, and the excess of $18.1 billion in economic number of unemployed being a mere 220 people. value in the 2009 2010 period and is While the unemployment rate in the Isaac Region has crept up from its low of 1 per cent in 2012, it is one of the fastest growing economies still very low, especially in comparison to Australia in Queensland. and Queensland, which had unemployment rates of 5.7 per cent and 6 per cent respectively as of June 2013.

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Moranbah - Positive Property Report | Issue 15 7 View Positive Properties Now Another standout point for the town is the high level of household income. The area had a median household income of $2,579 per week in 2011, more than twice the national average of $1,234 per week, and Moranbah had an even higher median household income of $2,778, per week.

These high wages are due to the fact that the majority of people living in Moranbah are in the mining industry. Ever since the resources boom in early 2000, Australia’s mining industry has been at the forefront of wage growth in the country. This is because soaring global demand for commodities has ensured that mining workers remain in demand. As the mining sector has increased production, it has raised its employment levels and (especially) wages to attract new workers, particularly for workers going to high demand areas like Moranbah in the Bowen Basin.

Furthermore, a recent report by Suncorp Bank found that miners are the new elite of Australia’s workforce – out-earning all other industries by an average of $60,000 per year. In an industry where overtime is common, these ‘fluoro’ collared workers, alongside their blue collared brothers, have overtaken their white collar counterparts in Average wages by industry, 2012 the wages war. Among them, the FIFO miners are Source: Suncorp Bank Wages Report 2012 now amongst the highest paid workers in Australia. It’s no wonder then that, according to a study by Commonwealth Bank, the largest wage increases in Australia were in the mining sector at 5.2 per cent over the year to June 2012.

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Moranbah - Positive Property Report | Issue 15 8 View Positive Properties Now THE RESOURCES PIPELINE

The rapid expansion of coal mining in the Bowen Basin is expected to see a 100 per cent increase in coal production between 2012 and 2020. This expansion will be principally driven by coking coal mining which is one of Moranbah’s largest resources. Coking coal is attracting major new investment in the region due to the demand for this resource by emerging industrialised countries that use it to produce steel.

In particular, the urbanisation of China and other developing countries such as India, South Korea, Malaysia and Indonesia are creating an immense demand for coking coal, as cities continue to be developed and constructed at a rapid rate. The current production of steel in China alone is nearly equal to the production of steel in the rest of the world combined, at a staggering 650 Mt per year. With 37 new cities being built in China over the next 15 years, it is expected that its steel production will reach a mammoth 1,100 Mt by 2025.

Due to the rising international demand for coal, large mining companies such as BHP Billiton, Vale and Peabody are advancing major projects, including the $1.7 billion Grosvenor coal mine Anglo American which commenced in the middle of 2012, less than 20km from Moranbah. This site will employ 1,000 construction workers and 350 Coking coal is attracting major operational workers. Meanwhile, the $1.9 billion BHP Billiton Caval Ridge mine 15km south of Moranbah new investment in the region due will employ 2,000 construction workers and 500 to the demand for this resource by operational workers. emerging industrialised countries.

Other projects recently completed include the $1.6 billion Daunia mine, which has created 450 jobs during its operation, and the $874 million Broadmeadow mine expansion. These projects alone represent a workforce increase in excess of 15 per cent of the town’s population during the construction phase which will place extreme pressure on the town’s housing and accommodation supply.

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Moranbah - Positive Property Report | Issue 15 9 View Positive Properties Now INFRASTRUCTURE INVESTMENT

The major new mining investment in Moranbah is leading to spending on improved infrastructure in the town including rail and air transport. For example, Asciano’s coal haulage division Pacific National Coal constructed a state of the art $180 million train maintenance and provisioning facility at Nebo, near Moranbah. The Moranbah airport has also undergone a major $47 million upgrade and now services approximately 160,000 public and charter passengers each year. This has helped to facilitate the huge number of FIFO workers coming into the town.

The local infrastructure in Moranbah has been placed under a great deal of stress due to the increase in not only the permanent population over the years, but also the rise in FIFO workers, all using the town’s services. Recently, its town centre has been refurbished, and now includes an interesting water feature and new child’s play area. According to the Isaac Regional Council, this has created a relaxing atmosphere where you can enjoy a coffee break with friends at the local bakery while entertaining the kids. More services are gradually coming to the town, and a new McDonald’s store opened in the middle of 2012 is evidence of the growth that has been experienced.

More services are gradually coming to the town, and a new McDonald’s store opened in the middle of 2012 is evidence of the growth that has been experienced.

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Moranbah - Positive Property Report | Issue 15 10 View Positive Properties Now From pension dependant to self-funded retiree

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Page 11 PROPERTY MARKET

Moranbah - one of regional QLDs popular investor hotspots

In many ways, Moranbah shares the characteristics of the mighty inland iron ore boom town of Newman in the Pilbara region of Western Australia. Surrounded by numerous mines and extremely limited (until recently) in its supply of rental properties, Moranbah has experienced two major property booms. These two booms contributed to an average annual growth rate of 23 per cent in the decade to 2012 and over a 1,000 per cent increase in median rents from $170 per week in 2002 to a massive $1,710 per week in 2012. More recently the property market has experienced a correction, with prices and rents falling, but going forward the fundamentals Median house value and annual growth in Moranbah: 1999 - 2012 are strong, and investors remain confident about investing their money into the region, with further growth expected. The two booms

The first property boom in Moranbah coincided with the start of the commodities boom (2002-2006), when median house values soared by a staggering average of 37 per cent per annum and peaked at an amazing 57 per cent increase in value during 2005. While this first boom moderated in 2008 due to the global financial crisis, unlike the vast majority of property markets around Australia (and similarly to iron ore boom towns, Newman and Port Hedland in Western Australia), growth remained positive at between 5 - 7 per cent.

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Moranbah - Positive Property Report | Issue 15 12 View Positive Properties Now The second boom began in 2011 and coincided with the approval of major infrastructure projects and near tripling of rents over the two years to 2012, with median rents rising from $650 per week to $1,710 per week and median house values rising 18 per cent in 2011 and an impressive 35 per cent in 2012 (year ending September 2012). Indeed, according to the Queensland Rental Bond Authority, median rentals for four bedroom houses hit $2,600 per week in March 2012 – up from $1,100 per week in March 2011. Current state of the market

Due to huge capital growth rates for properties over the past decade, Moranbah has gained a reputation as being the stand-out resource town in Queensland for property investors.

Properties in the town have recorded annual capital growth rates in excess of 20 per cent and in 2011 the town topped the ranking for capital growth in Australia with a massive 29 per cent increase in property values, over the 12 month period.

The substantial growth in property values and rents in Moranbah in recent years was due to the huge increase in population in the town. There was essentially insufficient housing to keep up with demand that came Top five suburbs for capital growth over 2011, Source: RP Data after mining in the area took off. In more recent years, however, the growth in the market has been tempered, and has come back to more normal levels. According to Residex, the median house price is Moranbah has fallen and is now around $512,000, while the median weekly rental rate is $690. For units, the median value is $440,000 and the median weekly rental is $510. Residex figures show that yields for houses and units are sitting around seven per cent, but anecdotally, yields are up to ten per cent for some properties. The vacancy rate in Moranbah is currently sitting at around seven per cent.

So why the fall? There are several events that led to the property market coming back to more normalised levels.

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Moranbah - Positive Property Report | Issue 15 13 View Positive Properties Now Circumstances that lead to market correction While Moranbah has experienced the highs of the commodities boom, there is no denying that 2012 was a very tough year for the township. During this time the housing market experienced a setback due to a series of circumstances:

• Strikes by BHP Billiton-Mitsubishi Alliance (BMA) miners over their enterprise agreement, in addition to falling production in the mines due to a particularly bad wet season, led BMA to stop leasing as many homes for their workers.

• This was compounded by the fact that owner-occupiers were taking advantage of higher property values in the town and were selling up and moving to coastal areas for a ‘sea change’. Investors keen to get into the Moranbah market and take advantage of its high rental yields snapped up those properties at a fast rate, which, in addition to BMA not renting properties, flooded the rental market.

• Further, after many years of delays, the production of new dwellings in Moranbah picked up in late 2011 and numerous new dwellings were delivered for investors and released into the market, so the shortage that had previously been experienced was lessened. The worst of this now seems to have well and truly passed, however, and the fundamentals for Moranbah going forward are strong. In fact, several positive events occurred following the events mentioned above, putting Moranbah and its property market in a strong position going forward:

• Significant income rise for miners A landmark Enterprise Bargaining Agreement (EBA) The EBA will deliver a pay rise that was finally agreed upon between Union and of 15 per cent and lift annual BMA in October 2012, ending two years of prolonged superannuation contributions to strikes that had also led to the closing of two BMA operated coal mines (neither in the Moranbah 12 per cent (up from 9 per cent), vicinity). The EBA will deliver a pay rise of 15 per with productivity bonuses of up to cent and lift annual superannuation contributions to $15,000 pa. 12 per cent (up from 9 per cent), with productivity bonuses of up to $15,000 per annum.

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Moranbah - Positive Property Report | Issue 15 14 View Positive Properties Now Not only are the majority of workers happy with the three year EBA outcome, they are much more highly paid (many miners now earning up to $150,000 per annum) and therefore this will have a strong positive effect on the rental markets in the Bowen Basin. Further, the EBA essentially guarantees industrial ‘calm’ for three years following it and also includes provisions for more ‘family-friendly’ rosters that will enable them to live locally.

• 50% increase in coal production announced by major employer BMA BMA has announced that they expect their coking coal production from the Bowen Basin to increase 50 per cent by 2015 now that the industrial action has ended. BMA also confirmed that water logged mines are becoming fully operational again and this will contribute to the rapid rise in production.

• Rental freeze lifting BMA has commenced renting in the market again, signaling their acknowledgment that their projects are bringing a rapid influx of workers back into town.

So where to for the market now? The tide is turning…. As outlined earlier, the growing investment in the coal mines surrounding Moranbah has seen a major increase in the population which has substantially outpaced the supply of housing in recent years and has put significant pressure on property values. While there was a slowdown in Moranbah’s market in recent times, anecdotal reports suggest activity is starting to pick up, which is great news for property investors. In fact, some real estate agents have reported that the market is dramatically improving. While this is a positive sign, the forecast population growth for the town BMA has confirmed that water and the Isaac Regional Council area in general will logged mines are becoming fully no doubt put further upward pressure on property values and rents over the coming year. The growing operational again and this will workforce and the town’s limited land availability contribute to the rapid rise in due to surrounding mining leases will once again production. increase pressure on housing supply.

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Moranbah - Positive Property Report | Issue 15 15 View Positive Properties Now It’s normal for property markets to have ups and downs, and particularly in regional towns this can happen very quickly. Although, investors must consider the underlying fundamentals of the area they’re investing in, and Moranbah has many positives. Mining activity is still strong, with more planned for the future, and demand for the town’s resources is clearly strong throughout the globe (see page 18 for a detailed explanation of the demand for Moranbah’s resources).

Now is a good time to invest Investors should be seeing the current low period in Moranbah as an opportune time to get into the market. It is unlikely prices will fall any further, and with prices currently lower it is possible to buy at a more affordable level. Furthermore, with demand reportedly already on the increase for housing, and the population only set to grow into the future, investors can be confident values will rise going forward, as well as rental rates. Investors should always take a long-term view when investing in property anywhere, and Moranbah will pay dividends in the long run, particularly for those investors who take advantage of the prime opportunity to buy now.

Tenants As a result of the strong population growth in Moranbah driven by growing investment in the coal sector, the town has recorded very low vacancy rates and while this eased in the second half of 2012, it is predicted there will be a return to the traditional low vacancy rate. Due to rental wage agreements leading to higher wages for miners, it is likely rents will also rise again, most likely to new highs.

The rental market in Moranbah is rapidly changing, with increasing demand for quality homes as more families are attracted to the town due to improving facilities. While the current gross rental yield in Moranbah is averaging seven per cent, well located rental properties in the town that appeal to workers can achieve positive cash flow returns of around ten per cent in today’s market.

With rents tipped to continue to rise in Moranbah, investors are well-advised to conduct regular market reviews to ensure their investment properties are continuing to achieve the top market rent, hence maximising the return.

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Moranbah - Positive Property Report | Issue 15 16 View Positive Properties Now Demand for Moranbah’s resources to strengthen with urbanisation In addition to recent events that have cemented Moranbah’s strength and stability, the town’s future is bright due to its fundamentals, with mining continuing to be strong due to firm demand for coal globally.

The global economy is expected to grow by around US $50 trillion by 2025 –meaning the economy will double in size over the next two decades. Across this period, the primary driving force fueling the global economy will be urbanisation.

Like industrialisation before it, urbanisation is producing a tidal wave of economic growth and driving the booming commodities industry. The global trend of urbanisation is significantly contributing to the increase in demand for resources, while new forces in the global economy – namely China, India, South Korea and Indonesia – are all on a path of development and growth which is leading to their need for steel, coal and LNG to soar.

Leading this growth is China, a country that is urbanising at a very fast pace, and is forecast to see its economy grow by a breathtaking 150 per cent between 2011 and 2025. This growth rate is triple that of the United States and the European Union according to recent analysis by the world’s largest economics organisation, Global Insight.

According to the United Nations, about 60 per cent of the world’s population will be living in urban centres by 2030, compared to 34 per cent in 1960, and 52 per cent today. China is already experiencing mass migration from rural farmlands to urban centres. It’s believed that almost 255 million people will move to China’s urban regions over the next 15 years, stimulating the creation of 37 cities about the size of Perth over the next decade. China is also a major player in coal consumption and is experiencing strong demand for energy (thermal coal) and steel production (coking coal).

Chart: GDP change between 2011 and 2025 (2005 real PPP US$ trillion)

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Moranbah - Positive Property Report | Issue 15 17 View Positive Properties Now Jakab Golding, late 30’s Weekly rental income, $6,000 Property portfolio value, $2.7 million

Back in 2003, Jakab had just arrived in Port Hedland after two years as a door-to-door salesman and several years labouring with the St. Vincent de Paul. “I arrived in Port Hedland with very little money but a lot of ambition to make a success of my time there. I didn’t even know how to drive a car when I came to Port Hedland.

“I purchased 87A & B Bottlebush Crescent through Ryan Crawford and was so impressed by his high level of service I organised for Crawford Property Group to manage all of my properties in the Pilbara as well as selling my property at 25 Maugher Place for a profit of $400,000 in 2008.

“The income generated from these properties has allowed me to pursue my love of travelling – I have travelled extensively throughout the world over recent years. It has also allowed me to indulge myself in my love of music and I am currently working on a major music project which I would be unable to undertake if I was working in a 9-5 job on an average salary.

Jakab plans to add to his current property portfolio by engaging the services of Crawford Property Group to identify more positively geared properties in emerging hot spots.

Start enjoying a better quality of life today and secure your future. VISIT US AT crawfordrealty.com.au

CPG, helping everyday Australians become success stories. P: 1800 755 966 Follow Us Much has been made of the ‘slow down’ of growth in China, but in fact, over the past ten years China has proved consensus economic forecasts wrong nine times out of ten – with Chinese growth far outperforming forecasts.

The reality is that China is much stronger economically than its critics claim and has many times the capacity to stimulate its economy than the United States or Europe. Indeed, in September 2012, China launched a US$150 billion stimulus program to build infrastructure projects across 18 of its cities. During the global financial crisis, it launched an even larger US$500 billion stimulus program that drove commodity demand through the roof.

Unlike American stimulus spending that ends up on Wall Street and the casino speculation of its investment bankers, Chinese stimulus packages are actually building ‘real’ infrastructure – infrastructure that require immense amount of coking coal (for steel making), thermal coal and LNG (both for electricity production).

Annual seaborne coking coal demand Demand for coking coal (million tonnes). Source: IEA, Macquarie Bank. Demand for resources is not just from China – it’s also from other developing countries such as India, South Korea, Malaysia and Indonesia. The current production of steel (for which coking coal required) in China alone is nearly equal to the rest of the world combined, at a staggering 650 Mt per year. With 37 new cities being built in China alone over the next 15 years it is expected that its steel production will reach a mammoth 1.1 billion Mt by 2025. This demand for steel is forecasted by the global

Above Photo: Shanghai 20 years ago and today. The dramatic impact of industrialisation and urbanization in China is visually best demonstrated by the growth and change of this city. Global steel production. Source: CEIC; World Steel Association. Page 19

Moranbah - Positive Property Report | Issue 15 19 View Positive Properties Now commodities research and consultancy firm, Wood McKenzie, to translate into a lift in coking coal imports by 80 per cent from 250Mt per annum in 2011 to nearly 450Mt per annum by 2020. Demand for thermal coal Rising energy demand – particularly from China – will also see approximately a 30 per cent increase in thermal coal seaborne demand globally, according to Wood Mackenzie. Commodities boom isn’t over While the Australian media, and others, have been reporting since 2012 that the commodities boom is over, the reality is that there is still plenty Seaborne thermal coal demand of demand globally for our Country’s resources.

It’s true that commodity prices did retract, and while China’s growth is slowing, it is important to note that it is still moving ahead strongly.

In response to demand for resources, particularly for developing countries around the globe, there is strong investment in resource projects throughout Australia. In Queensland alone, expectations are that coal production could triple by 2020, with coking coal production to rise to 100 per cent. According to the Queensland Resources Council, following a modest 50 per cent growth in coal production over the previous eight years, the Queensland coal production – Mtpa Source: ABS, DEEDI, QRC survey results large scale expansion of mines in the Bowen Basin will see production increase by 100 per cent by 2020.

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Moranbah - Positive Property Report | Issue 15 20 View Positive Properties Now So what does all this mean for property investors? While Moranbah experienced a setback in 2012 due to a series of events, its future is positive.

It’s true that prices and rents have fallen, but more than anything this is providing investors with an opportunity. Now is the time to buy; you can take advantage of more affordable prices knowing that further growth is just around the corner.

Anecdotal reports suggest market activity in the town is already dramatically improving, which is one good sign. Furthermore, continued strong mining activity, in response to strong demand for resources around the globe, particularly in developing countries, will see more workers move into Moranbah, and this will once again put pressure on the housing market, leading to value and rental growth. Population growth in the Isaac Regional Council is set to rise by 60 per cent by 2031, and this will undoubtedly underpin growth in the housing market. Rents will also experience upward pressure due to the demands placed on housing, as well as the rise in wages for mining workers in Moranbah.

In line with population growth, Moranbah will continue to grow as a town, with more services and facilities expected to be provided, and in turn, this will make it even more attractive to those moving to the area.

If you want to know more about the possibilities of investing in Moranbah contact the experts, Crawford Property Group, or visit us at crawfordpropertygroup.com.au.

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Moranbah - Positive Property Report | Issue 15 21 View Positive Properties Now QLD

Brisbane P (07) 3010 9791 F (07) 3010 9001 E [email protected] Level 5, 320 Adelaide Street Brisbane QLD 4000

WA

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Derby P (08) 9193 1284 E [email protected] PO Box 418, Derby WA 6728

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