Bowen has a strong future, but in the short-term its market is likely to decline.
Why now could be the time to buy in Bowen: Terry Ryder
Property investors need to be constantly vigilant with their research, particularly when local events can quickly change market dynamics.
Bowen, a bright and busy regional centre in Queensland boosted by agriculture, fishing, tourism and mining, provides a stark example. It has a strong future, but in the short-term its market is likely to decline.
Almost overnight, vacancies have gone from low to very high. Late in 2012, vacancies were well below 3%. In mid-February, they’re around 18%, according to local estimates.
How did that happen? Bowen, until recently, was busy with construction work, some of it re-construction work from recent storms and some of it new residential buildings.
Lots of builders were in town and the small crop season was in full flight, which meant there were seasonal workers renting. There was also demand from people working in coal mines in the region.
Lately, a series of adverse events have coincided. The construction projects and the small crop season have ended, while coal mines have downsized. Lots of workers have left town, at a time when the new residential buildings have added to the level of investor stock.
Tony Doyle, principal of LJ Hooker Bowen, says Bowen has copped a triple whammy.
“All of a sudden we have an enormous vacancy rate,” he says. “There are 224 vacancies in Bowen advertised by all agents – which means 18% or 19%, which is unheard of in Bowen.”
In the circumstances, a decline in rents and prices in inevitable. But it’s likely to be short term. Bowen has a lot of big things on the medium-term horizon, because the Abbot Point export facility sits just outside the town.
Multiple billions of dollars will be spent on new rail links from the emerging Galilee Basin coal mining province and on expansion of Abbot Point facilities. There will likely be action on those projects in the third or fourth quarters of the year.
Major investors include the two Indian entities gearing up to spend around $10 billion each establishing coal mines, rail links and export facilities in Queensland – Adani and GVK. Adani has already invested $1.9 billion in a 99-year lease over the X50 Abbot Point Coal Terminal.
Others with interests in an expanded Abbot Point include BHP Billiton and Gina Rinehart’s Hancock Coal.
“We have some great things coming up, but it’s happening very slowly,” Doyle says. “It’s frustrating.”
In the meantime, if you believe Bowen has a solid future, there may be opportunities to buy well in this market.
Currently the median house price is around $350,000, largely created by an upturn in the four to five years leading up the 2007. I’d be expecting that to drop a little over the next six months or so.