Australian Property News
Property bubble bursts in Moranbah, but for how long?
Posted on Tuesday, April 03 2012 at 3:57 PM
House prices in Moranbah have fallen by as much as $100,000 in the past month and rents by as much as $800 per week, according to Real Wealth Australia’s Ed Kogtevs.
The sudden downward slide is “unprecedented” and the result of a standoff between landlords and investors.
So severe is the bubble burst, that Real Wealth Australia is now warning investors not to buy there, after months of telling investors that Moranbah was one of the best ‘hotspots’ in the country.
“Don’t buy, it’s too uncertain at the moment,” warns Kogtevs.
“I had three places go up for rent in the last three weeks. I’m still getting $1800 a week but prior to Christmas I would have got about $2300 or $2400 per week.”
Kogtevs says the reason behind the sudden rental collapse is because BHP Billiton-Mitsubishi Alliance (BMA) is going hard on its enterprise agreement with the unions.
“They could be going for lockouts and doing a Qantas,” he explains.
At the same time, BMA and other mining companies are trying to drive down rents by refusing to re-sign new leases. But the double whammy is that residents who have lived in Moranbah all their lives are now bailing out and selling their properties for their retirement, says Kogtevs.
“We had clients paying $840,000 for a property on a contract and they were able to negotiate down to $740,000.
“We’re recommending people who aren’t unconditional on a contract do this. If you haven’t already purchased, we say pull out or negotiate down.”
Kogtevs adds prices might even get down to around $650,000 for houses in a few months, so it’s probably best investors sit tight for now.
“Right now it’s too uncertain and you could be buying above market value.”
According to this month’s API magazine, Moranbah had a 36 per cent increase in its median price over the past 12 months, climbing to $626,000.The median rent was $1500 per week (see this month’s May issue for more statistics).
Brendan Carroll is one of the investors who is feeling the pinch. He recently bought a property in Moranbah for $498,000 and after renting it out for $875 per week, he was hoping to get a new lease on the property for $1400 per week. Instead, he’s now leasing the property on a month-by-month basis until the drama is over.
“Rents will go up again so we’re holding out for a higher lease,” he says.
He also had two properties under contract for $800,000 that were both renting for about $2400 per week. However, he’s just pulled out of both contracts due to high building costs as well as rent.
He says in future, he’ll only consider buying properties in Moranbah with locked-in leases.
“It’s just another factor, you have to have a lease in place,” he says.
Terry Ryder of hotspotting.com.au says the situation highlights the danger of investing in a mining town, where prices are “a bit artificial”.
“A single major employer can use its market power to achieve something such as forcing down rents,” Ryder says.
“A lot of investors have been getting very excited about Moranbah. This is a classic example which may inject a bit of reality into the situation.”
On the other hand, Kogtevs says new mines are opening up in Moranbah and it has a great long-term future. In fact, he believes investors will do very well if they can buy in Moranbah in a few months when the stand-off inevitably ends and prices start to rise again.
“Wait until the number of rentals drops to around 50. At the moment there are 138 rentals available. Then we say get back into the market. You should be buying in Moranbah, just not right now.”
A spokeswoman from BMA said the company “politely declined to comment.”
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