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Builders Tap Mining Boom in Remote Towns as Australia Cities Sag

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Builders Tap Mining Boom in Remote Towns
Homes stand in the town of Karratha in the Pilbara region of Western Australia. The median house price in the shire of Roebourne, which includes Karratha was A$795,000 as of Sept. 30, according to industry researcher Australian Property Monitors. Photographer: Ron D'Raine/Bloomberg

Nov. 9 (Bloomberg) -- Australian developers are stepping up projects in remote mining towns to profit from A$430 billion ($446 billion) of investment in natural resources as home prices in the biggest cities fall the most in two years.

Billionaire Lang Walker’s Sydney-based Walker Corp. is building a community of 919 homes in Gladstone, home to more than A$30 billion of coal-seam gas projects 530 kilometers (329 miles) north of Queensland capital Brisbane. Finbar Group Ltd., based in Perth, is constructing a 293-unit complex in Karratha, one of the world’s remotest locales in Western Australia.

Demand for workers is outstripping the supply of housing in mining areas, pushing median prices in towns such as Karratha to more than double New York City’s. That contrasts with Australia’s eight capital cities, where prices fell 1.2 percent in the three months to Sept. 30, highlighting the dilemma of a two-speed economy where mining and related businesses boom while other industries lag behind.

“The developers who are focusing on these areas are doing quite well and will do quite well,” said Andrew Harvey, senior economist at the Housing Industry Association in Canberra, Australia’s capital. “But the mining activity is fairly localized and it’s not enough to offset the deterioration in new home building in other parts of the country.”

The number of building approvals in Perth, Western Australia’s capital, fell 4.5 percent in September from a year ago, according to statistics bureau data. Approvals in the arid northwest Australian region of the Pilbara, near BHP Billiton Ltd. and Rio Tinto Group’s iron ore operations, doubled in the two months to Aug. 31 from the previous year, according to the latest figures available from the statistics bureau.

Price Increases

The median house price in the shire of Roebourne, which includes Karratha, the biggest town in the Pilbara, was A$795,000 as of Sept. 30, according to industry researcher Australian Property Monitors. In New York City, the median price was $350,729 in August, the latest month for which data was available, according to real estate website

In Gladstone, house prices climbed 4.8 percent to A$435,000 in the year to Sept. 30, APM said, on the back of planned liquefied-natural-gas and coal-seam gas projects. The median price of an apartment in Australia’s most-populous city, Sydney, was A$451,291, APM said.

Closely held Walker Corp. is creating the Forest Springs estate on 120 hectares (297 acres) in Gladstone. It entered a joint venture in September with Eureka Funds Management, which owned the site, to take advantage of the surge in demand for housing in the town of more than 60,000 people. The land lots are selling for an average of about A$270,000, according to Dorothy Novak, the company’s national marketing manager.

LNG Projects

Settlement of the first properties at the project, close to the Gladstone Marina and boat ramp, will be by April next year, and the entire development completed by 2016, Novak said.

“We felt it was something we could grow and capitalize on the infrastructure there, the LNG plants and the expected population growth,” Novak said.

In Queensland, Origin Energy Ltd. and ConocoPhillips are set to start their A$20 billion Australia Pacific LNG project later this year. Adelaide-based Santos Ltd. said in January it expects to spend $16 billion on its coal-seam-gas-to-LNG project, while rival BG Group Plc said last October it would invest $15 billion in its Australian LNG venture.

The ventures plan to liquefy gas extracted from coal deposits for export to Asian markets.

The government estimates Australia’s pipeline of resource investment at A$430 billion, with about 40 percent of plans already at an advanced stage. The Reserve Bank of Australia said in minutes of its October monetary policy meeting that the value of LNG projects announced so far is about A$70 billion.

Rate Cut

The RBA on Nov. 1 cut its benchmark interest rate 25 basis points to 4.5 percent, the first reduction since April 2009, as inflation eases and weaker global growth threatens to slow the nation’s economy.

Brisbane-based Devine Ltd. is moving into Gladstone for the first time with plans next year to start construction on what will become the town’s biggest residential community.

Demand for the A$1.5 billion, 2,900-home development has been “extraordinarily high, reflecting the announcements about new LNG projects,” said Chief Executive Officer David Keir.

Santos and BG said they planned to start hiring the first of more than 10,000 construction workers needed for their two separate Queensland projects this year.

Labor Shortage

The boom in towns such as Gladstone is driving up building costs. Citimark Properties, which is building the 330-lot Emmadale Gardens development on 37 hectares in Gladstone and planning a second project in the town, is facing a shortage of workers who prefer the high wages paid by mining companies.

“We have about a 50 percent staff turnover,” said Geoff McWilliam, residential land director at the Brisbane-based closely held housing developer. “Most non-LNG industries are struggling to retain workers as the LNG companies pay more.”

Emmadale Gardens, set in parklands equal to 12 football fields, has sold all but 10 blocks, said McWilliam. The shortage of accommodation has helped the company sell more lots in the past 10 months than over the preceding three years, he said.

Rents in Gladstone have risen more than 60 percent in the past year to about A$650 a week for a four-bedroom house, he said.

‘Can’t Compete’

Citimark is also building a 114-lot residential estate, expected to be completed next year, in MacKay, the gateway to Queensland’s Bowen Basin, where BHP, Macarthur Coal Ltd. and Aquila Resources Ltd. all have mines. It has smaller projects in the mining towns of Chincilla and Emerald, he said.

Construction costs at Finbar’s Karratha project are about 1.5 times higher than for similar projects 1,500 kilometers south in Perth, said Managing Director Darren Pateman.

“We can’t compete for the same labor force as the mining companies,” Pateman said. “We also have to send all our materials from Perth up to Karratha. The end result is, we need to achieve that similar multiple in respect to the end sales. Luckily, there’s demand at that price range.”

Finbar’s typical two-bedroom, 85-square-meter apartment in Karratha has been selling for about A$850,000, Pateman said. Buyers include both mining and supporting companies purchasing properties to house their workers, and some individuals investing in new homes, he said.

“In these areas, which are the epicenters of the resources activity that’s happening at the moment, there is a shortage of housing,” said Sydney-based Andrew Wilson, senior economist at APM. “But the prosperity is fragmented. The capital cities are soft, and even within the mining towns, there are sectors that aren’t benefiting.”

To contact the reporter on this story: Nichola Saminather in Sydney at

To contact the editor responsible for this story: Andreea Papuc at

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