Mining zones property ‘big investor risk’

PROPERTY investors have been warned buying homes and land near Adani’s recently approved coal mine could be high risk.

While Clermont residents are largely celebrating the approval of the controversial mine, Riskwise Property Research said investors should be careful before entering the market.

The $2 billion Carmichael mine will comprise six opencut mines and five underground mines covering about 447sq km, making it one of Australia’s largest thermal coal mines.

Riskwise chief executive Doron Peleg said while this might make it look like an attractive option for property investors, the economy of Central Queensland had been in decline “at an alarming rate” since the end boom.

He said investments in mining towns carried a higher level of risk generally.

“Our research has found that when you apply an indepth risk-return approach with a macro-overview, and review this over three years, many hotspot areas have significantly underperformed the market,” he said.

“This has most certainly resulted in many investors losing money, often having negative equity, particularly in regional and mining areas. Only 37 per cent of houses and 33 per cent of units of the Top 100 2014 property hot spots, many in mining areas, performed as well as the market benchmark over a three-year period, which means that, overall, the 2014 hot spots performed significantly lower than the benchmark. of the mining

“And the results were also similar for the 2011 and 2012 hot spots,” he said.

Mr Peleg said investors needed to comprehensively research the location they intend to buy in, attentively looking into the suburb growth and property type.

“The second issue is that … for example, property investment in mining towns is strongly correlated to movements in the commodities market,” he said.

“This was demonstrated following the recent mining boom when business investment in these towns was poor, leading to poor economic growth, a weak job market, low population growth, and therefore, poor capital growth in many so-called hot spots.

“When it comes to Clermont, there has been a huge decline in dwelling prices,” he said.