Hotspots: High yields and price growth in Moranbah, but best time to buy may have passed

Moranbah ranked as the number-one suburb for capital growth over 2011, with house prices rising 29% from a median of $474,000 in 2010 to $612,000, according to RP Data.

Property investors continue to pour funds into the small northern Queensland town close to coal mining activity in the Isaac region with yields still on offer of up to 16%.

Sales activity has soared over the first two months of the year, with 44 houses sold in Moranbah over January and February, according to realestate.com.au figures.

This is more than double the 21 houses sold in the first two months of 2011.

Top Five suburbs for capital growth over 2011

Source: RP Data

Hotspotting.com.au director Terry Ryder says there will be further price growth in Moranbah, but believes that the best time to buy was 18 months ago before the growth in prices and rents gathered pace.

“There appears to be long-term sustainable demand from overseas markets for Queensland coal, so towns like Moranbah have a future.

“Investors need to be aware of the risks, however. Mining towns are highly vulnerable to economic cycles and sit at the high-risk end of the investment spectrum. Mining companies are increasingly opting to fly-in-fly-out (FIFO) workforces.

“BHP is seeking to run its new mine near Moranbah on a 100% FIFO workforce, so that does not generate accommodation in the town,” says Ryder.

RP Data’s Cameron Kusher also warns that investors must tread carefully when it comes to mining towns like Moranbah

"'We've seen locations where capital prices collapse as soon as the mine is shut down," he told the Sun-Herald earlier this month.

Local agents though continue to report record listings, high yields and strong investor demand for properties.

Sharyn Mackay from Vision Real Estate is seeking $1.25 million – a Moranbah record – for this five-bedroom house (below) on Longman Drive. According to principal Vikki Oldfield, the property would rent for more than $3,000 per week – a yield in excess of 12%.  It last sold in August 2010 for $710,000.

This four-bedroom house (below), marketed by Emma Elliott from Ray White Mackay Beaches and Moranbah with swimming pool on Gilbert Court close is currently under offer of $920,000 according to RP Data and renting at $2,800 per week. At this sales price, this equates to a yield of 15.8%. It last sold for just $121,000 in 2002.

Another local real estate agent, Craig Aitcheson from LJ Hooker Moranbah, described the market as the “craziest” he'd ever seen and believers there is still room for further price growth.

“I just can't see it slowing down with all the activity that's happening,” he told the Mackay Daily Mercury.

Aitcheson says 95% of inquiries are coming from investors.

The Moranbah region has undergone rapid population growth in recent times, with the population expanding from just over 7,000 according to the 2006 census to over 10,500 in 2009 according to the Isaac Region Council.

The supply of homes has received a small boost in recent months with the launch of a new residential community known as the Bushlark Grove. The project will provide 160 new homes for around 400 people over the next six months at a cost of $20 million, targeted at the more affordable end of the market.

"Bushlark Grove will provide more affordable housing through the improved supply of residential land and a greater range of housing types to cater for the needs of the Moranbah community," says Urban Land Development Authority director of residential development Peter Smith.

However, the creation of new residential communities around Moranbah appears limited.

Following the recently released Mackay Isaac Whitsunday Regional Plan 2012-2031, aimed at easing the housing squeeze and dependence on fly-in, fly-out workers, Queensland Local Government Minister Paul Lucas says Moranbah's urban footprint could not be expanded because it is surrounded by mining leases.

In December, Moranbah’s status as a coal exporting hub was enhanced with the opening of the new $1.1 billion rail link Goonyella to Abbot Point rail link north of the town.

The rail link will increase the capacity of coal exports by a further 50 million tonnes each year.