The Rocket Ride – Will It Continue? – A Property Review of Gladstone QLD

By Adam Gilbert

Before recommending a property or an area to a client I like to visit and do my own research. I had heard some mixed reports about Gladstone. But after a tour with local building veteran Roy Atkinson I started to have the revelation that this was one of the strong economic areas in Australia.

Roy shared with me his building experiences spanning over 30 years and his rocket ride to multi-millionaire status in the last few years by simply building spec homes and holding them. We spent most of the day on a tour around the city and neighbouring communities such as Cutis Island, Calliope and Tannum Sands.

The statistics show why Roy has been so successful with his investing. The medium price for houses in Gladstone 2001 was $110,000. Just five years later the median price was $344,000. That’s an average annual growth of an amazing 25.6% (PRD Nationwide). The first quarter this year shows the median price at $380,000. There is some speculation that the ride is over for people investing in Gladstone. However, I beg to differ! With record low vacancy rates and new employment opportunities coupled with a shortage of available housing stacks up to an unprecedented opportunity.

I don’t believe I am alone in my opinion. Michael Addison wrote recently in the Investment Property Reporter (p16, vol 36, 2009) about the massive investment into the local economy. Currently there is an amount of $20 billion being spent on the infrastructure of this tiny town of 67000 people. This spend will go towards the following –

·         Liquid natural gas drilling

·         Construction: - pipelines, factories, rail lines, gas and coal leaders.

·         New shale oil projects

“Think about the impact of $20 billion dollars (that’s $20,000,000,000) spent in a region with a current population of just 67000; that’s $289,855 for each man, woman and child” A figure as large as 20 billion sounds impressive – but when both government spending and private spending are put together it totals over $34 billion that will be spent in the region (QLD Government Dept. Infrastructure and Planning).

Coming back to my trip with Roy he pointed out many of the reasons why this small town is the strongest economic centre in Queensland.

The region boasts: -

·         Availability of industrial land

·         Close proximity to domestic and international significant market places

·         Rich, natural resource deposits including; coking and steaming coal, limestone, magnesite and mineral sands.

·         Internationally recognised Central Queensland University and Central Queensland Institute of TAFE.

·         Community support for responsible industrial development

·         A highly multi-skilled workforce.

·         Quality lifestyle

·         Existing wealth and diversity of industry.

Perhaps one of the most significant aspects of the region is its port. Gladstone has a natural deepwater harbor – it is through this harbor that some 53 million tons of cargo passes through each year- including 37.5 million tons of export coal from open cut mines in the rich Bowen Basin reserve. The port moves over 30% of the State's exports and close to 10% of the Nation's exports by volume. The Gladstone Port is the fourth largest coal exporter in the world.

Major companies within the Gladstone Region include:

·         Queensland Alumina Limited - The world’s largest aluminum refinery.

·         Boyne Smelters Limited - Australia’s largest aluminum smelter.

·         Rio Tinto Alumina Refinery Yarwun.

·         Cement Australia.

·         Orica

·         Queensland Nitrates Pty Ltd

·         Anglo Coal – Moura

·         Cracow Mining Joint Venture (CMJV) – Cracow Gold Mine

There are also a number of major industrial developments under construction or investigation which will see the Gladstone Region boom. These include:

·         Development of the current TICOR site

·         Belvedere Coal

·         Xstrata – Wandoan

·         Anglo Coal – Dawson Coal Mines

·         Enertrade – Central Queensland Gas Pipeline

·         Lodestone Exploration – Cracow and Calliope Shire

·         Molopo Australia

·         Monto Coal Mining Project

·         Queensland Energy Resources Limited – Stuart Shale Oil Project

While this city has a strong industrial base, the Gladstone Region is one of the best kept holiday secrets in Queensland. The Region boasts some of the most spectacular coral reefs on the Southern Great Barrier Reef, golden beaches, great fishing and national parks.

So in summary Gladstone caters well for future industrial growth with extensive planning for services, land and infrastructure requirements. Existing industry, infrastructure, resources and skilled labour enhance the attractiveness of the Region to potential new industries.

A word of caution, do not neglect to look at the surrounding communities. Many people prefer to live just outside the major town centre due to the industrial nature of the town and the population created by such industry. Places like Calliope and Tannum Sands provide a beautiful lifestyle yet within thirty minutes drive of the Gladstone town centre. In fact 32.7% of workers in the Gladstone area have chosen to live in Calliope, away from the hustle and bustle of the busy city (GAPDL, March 2009, p5).

Curtis Island, at present a holiday destination, will be the home for what has been billed as the biggest and most significant industrial development. Santos will construct a multibillion dollar liquefied natural gas plant on Curtis Island. Developments such as Turtle Beach Resort are potentially riding this explosion of expansion!

I hope that this short article has brought to your attention the need to include Gladstone in your property portfolio. There are positive geared house and land packages available for $399K renting at $420 per week (the API databank shows median advertised rents as $300 per week, but Roy assumes me he is getting $400-420 on brand new four bedroom homes). The vacancy rate in October 2007 was 2.7%, just one year later that halved to 1.3% (API Databank). If you are looking for more positive cash flow there are some very attractive holiday destinations in the nearby area that can yield very impressive results.

Given that many areas around Australia have declined in value and activity, some investors have been tempted to sit on the side lines, a little wary about spending. With house prices falling in the USA, people have been reluctant to borrow to invest. I hope this report has encouraged you to venture back into the game and start looking at Gladstone property has an important part of your property portfolio. Current figures indicate that the people of Gladstone are certainly part of the ‘Recession? What recession?’ crowd.

The Gladstone region has indeed defied predictions of doom and gloom to post median price rises over the December quarter, according to the Real Estate Institute of Queensland (REIQ). The median house price in the Gladstone regional local government area rose 2.7 per cent for the December quarter to $375,000. REIQ Gladstone zone chairman Mark Spearing said the results reflected the confident mood in the area. “There’s still a lot of industry earmarked for Gladstone,” he said.

“I think, as a region, we’re weathering the economic uncertainty very well.” (Source: Excerpts from The Gladstone Observer – 9th March 2009).

We have some great opportunities in the area; please call us to discuss whether it suits your investment profile.

Adam Gilbert is an accredited Property Advisor with the Property Investors Association of Australia (www.piaa.asn.au).

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