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A leading Australian real estate researcher has urged property investors to avoid buying in mining boom towns, describing them as among the most risky of investments.

Terry Ryder, the director of www.hotspotting.com.au, said investors seeking to benefit from Australia's new resources boom should instead focus their attention on key regional centres strategically located to benefit from major new projects.

He said investing in such centres provides safer, longer-term capital growth potential than buying property directly in towns with major new mining or industrial projects planned or under construction.

"Generally, I would urge investors to avoid buying in pure mining towns," Mr Ryder said.

"Australia is littered with the carcasses of former mining boom towns such as Ravensthorpe and Hopetoun, and mining towns such as Mount Isa or Broken Hill that provide a roller-coaster ride of peaks and troughs.

"While investors who get in early can make big capital gains, most mining towns exist in a bubble which can burst if demand for resources drops, the local mine closes or housing demand falls away after construction of a major project is completed.

"Property buyers looking for boom town investments are better served looking for nearby regional centres that will enjoy the economic surge of major new projects, but are not solely dependent on it for their prosperity."

Mr Ryder has re-introduced his National Top 10 Boom Town Hotspots report, after a one-year absence, to advise property investors on how to benefit from Australia's new wave of mining and resources activity. His recommended boom town investments are:

  • Bunbury, Western Australia
  • Ceduna, South Australia
  • Geraldton, Western Australia
  • Gladstone, Queensland
  • Karratha, Western Australia
  • Newcastle, New South Wales
  • North-West NSW, New South Wales
  • Orange, New South Wales
  • Port Hedland, Western Australia
  • Portland, Victoria

Note: locations are listed alphabetically - order does not indicate greater weighting or importance.

Mr Ryder said his Top 10 Boom Towns list is based on well-rounded regional economies and includes no pure mining towns and only two locations, Karratha and Port Hedland, where there is an overwhelming reliance on the resources sector.

Even in these two locations, Karratha is a major regional hub with government administration and tourism elements, while Port Hedland also acts as a service town for Pilbara mining and is set to benefit from a major harbor upgrade.

While Mr Ryder's boom towns all have exposure to the mining and resources sector, they also have other significant economic drivers in the form of industrial and infrastructure projects and important transport links.

For example: Bunbury (urea and desalination plants); Ceduna (port upgrade); Geraldton (port and rail links); Gladstone (industry and tourism); Newcastle (port and rail links); North West NSW (agriculture, tourism and planned rail links); Orange (agriculture, tourism, education and government); and Portland (manufacturing and power industries).

"Regional centres make the best boom towns because they have strong, diverse economies and are not solely reliant on one project or industry," Mr Ryder said.

"The most valuable quality offered by such centres is their solidity. Unlike mining towns, it is rare for property values to fall. Strong regional centres provide growth virtually every year.

"They are steady markets for real estate investors because they draw in population from surrounding regions and provide a wide range of retail, commercial, educational, medical and administration services to wide catchment areas, and this flows through to housing demand," he said.

"Most importantly, these locations have an economic life before and beyond the resources cycle. For them, a surge in mining activity or major one-off developments is a bonus to their property markets, rather than being the sole drivers."

For more details and interviews on the National Top 10 Boom Town Hotspots report or individual locations, please contact Terry Ryder on 0408 011 595; 07 5494 2575 or ryder@hotspotting.com.au.

About Terry Ryder

Terry Ryder has more than 27 years experience in researching and writing about real estate. He is the author of four books on residential real estate and is regularly interviewed by media about real estate issues. Terry is the owner and creator of www.hotspotting.com.au, which provides information to property investors on how to identify emerging markets before they're common knowledge.

Published: Oct 29, 2009 10:56am

Last updated: Oct 29, 2009 10:56am

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