Developers Enter Energy Frontier Towns
Article by Michelle Singer, Australian Financial Review – Posted 15th Sep 2011
Billions in diversified mining and energy investments have started to lure some of Australia’s largest developers away from flagging capital city property markets into previously uncharted regional territories.
Walker Corporation’s $500 million planned community in Gladstone, Queensland, a joint venture with land owner Eureka Funds Management, joins listed developer Devine Ltd and Citimark in providing much-needed housing.
Underpinning the projects is the 10,000-plus workforce required to man the $60 billion in LNG and infrastructure projects in the city.
Macroplan economist and managing director Brian Haratsis said the trend for large-scale developers to invest in regional towns is at the beginning of its cycle.
He said developers were opting for areas where multiple mine and energy investments were committed rather than the more volatile and riskier single-commodity towns.
“Developers are beginning to see the scale of the market, they understand the size of the employment and residential demand and know these areas can handle large scale developments,” he said.
“They also understand the boom will run for 15 to 20 years and the terms of trade will stay at historically high levels until 2020.”
In Queensland house prices in coal-mining towns such as Moranbah now outstrip its biggest neighbour Mackay by 30 per cent and rents are some of the highest in the state, topping out at $2000 a week.
Blue Horizons Property managing director Corr Piccone is the middle man between developers and investors for residential subdivisions in the Surat Basin, 2.5 hours drive west of Brisbane. He said the market in Dalby, Roma and Chinchilla was being fuelled by a “unique perfect storm” of energy-related companies.
“These areas are unique because they are not just single-company towns; they are thriving agricultural communities and there isn’t the room for the 5000 or 10,000 workers that are expected to turn up here,” he said.
“Land is the key.
It’s in incredibly short supply for several reasons and it’s creating a six– to eight-month wait in every town for anyone wanting a house and land package.”
The Queensland government identified several resource areas in need of more housing last year, accelerating planning powers of the Urban Land Development Authority.
It also released some of its own land, including sites for 300 dwellings each in Roma and Gladstone.
“Approaches from local councils in these towns acknowledges the real need to deliver housing which targets non-mining workers who are struggling to afford to live in these communities dominated by mining and mining wages,” ULDA chief executive Paul Eagles said.
In NSW, towns such as Singleton, Muswellbrook and Gloucester in the Upper Hunter Valley are surrounded by 14 open-cut mines, fuelling residential housing and rental demand for the past five years.
Sydney north shore developer Monarch Investments is in its final stages of its 1100-block Eastbrook Links Estate in Muswellbrook, while chief executive Peter Icklow said smaller projects in towns such as Singleton have sold out.
Asking rents in Muswellbrook grew 18.5 per cent in 2010 while prices increased 11.5 per cent over the same period, according to Australian Property Monitors.
Herron Todd White’s September property outlook paper highlights Singleton as an “extremely attractive” town because of its capital growth and yields of 5.5 per cent.
Bathurst and Orange are also identified as areas most under pressure from transient mining movements.
In Western Australia the high cost of building and the historical shortage of land mean few developers have entered the resource towns of Karratha and Port Hedland. Lend Lease, Mirvac and Australand were the top bidders for the state government’s Pilbara Cities project.
The chosen developer, to be announced in November, will develop 2500 residential lots on 160 hectares of coastal land near Karratha, and five small, mixed-use lots in the town centre. The tender would be the first WA project outside Perth city for all three developers.
Perth-based developer Cedar Woods is in the early stages of a 120-lot development at South Hedland, while Finbar is building stage two of its Pelago apartment building in Karratha.
Listed WA-based developer Peet is not anticipating a move north but is keeping an eye on the area. “It’s risky as the region is heavily reliant on one industry,” managing director Brendan Gore said in March.
Last month the Real Estate Institute of Western Australia showed property prices in the Pilbara had softened with the Port Hedland median down 5 per cent and Karratha down 9 per cent in the 12 months to June.