I’ve been warning people for years about Mining Towns and, in some areas, they’re starting to listen. I made a few phone calls today to see what’s happening at the coal face (oh dear, pardon the pun).
It’s as I predicted. Rents are falling as mines bow under pressure to build Fly In Fly Out camps because workers, especially young ones earning big money, don’t want to live in the middle of nowhere. What’s a young fella or lass to do? Young guys especially have all the toys. Jet skis, V8 Ute, Harley Davidson, and a dog named Butch on a very fancy leather lead. You can’t parade the toys around a town of 1.500 people so they all head off to the Gold Coast or other Big Smoke to “splash their cash”.
It’s not only that but Mines are either not going ahead, cutting back staff, or transitioning from building the mine to operating the mine with a huge reduction in staff numbers.
I spoke with a mate in a central Queensland town who told me that rents near him have dropped 25% in recent times and are now down to half what they were last Christmas. Ouch!
Investors paid big dollars for these properties, sold to them with “Magic Mountain” rents of $2,000.00 a week so they borrowed big and in many cases mortgaged their own home to the hilt. The calculations may have worked well at $2,000 a week, but even with recent interest rate cuts, they don’t, and won’t work at $1,000.00 or even $800.00 a week. When there are no tenants, $0.00 a week is a disaster and that’s where many are headed.
Investors are already seeing the huge damage bills I warned them about. Their properties are abused and knocked about and local agents can’t or won’t keep up with necessary repairs. Investment properties that are being routinely maintained and repaired are costing their owners (admittedly tax deductible in most cases) a small fortune as everything in these regions is expensive.
If you are a very long term player then maybe investing in these areas is for you. You must be prepared to have long periods without any rent at all, high maintenance costs and what I call the WILD WEST or GOLD RUSH SYNDROME. That’s where everyone leaves and it’s a ghost town. Not only have you no tenants but your overpriced $800,000.00 “Investment Property” is now worth – NOTHING.