don’t invest in mining towns – or small towns
Mining Towns and Single Industry Locations can be a trap for property investors.
Where Should My Investment Property be Located?
Mining Towns and small, single industry locations. They are often spruiked to property investors as great places to invest. There are promises of high rental yields and capital growth… that is, until the mine or industry closes!
Why You Should Avoid Investing in Mining Towns
When considering where to invest, it’s essential to think long-term. While mining towns and single-industry locations may seem attractive due to high rental yields during boom times, these areas come with significant risks. Choosing to invest in mining towns can lead to financial setbacks if the local industry declines or the population dwindles. Here’s why avoiding such locations is crucial for sustainable property investment.
The Risks of a Single Industry Economy and mining towns
Mining towns are often heavily reliant on one primary industry. This reliance creates an unstable economic environment that can directly impact property values.
What Happens When the Mine Closes?
When a mine shuts down or production slows, it often leads to mass job losses. With fewer people living in the area, demand for rental properties plummets. Investors are left with unrentable homes and properties that have significantly dropped in value.
Limited Economic Diversity
Unlike metropolitan areas, mining towns lack economic diversity. A single dominant employer means the town’s prosperity is tied to the performance of that industry. Any downturn can have catastrophic effects on the local housing market.
Population Size Matters
Another key factor to consider is the size of the population. Towns with fewer than 100,000 residents often struggle to maintain consistent demand for housing.
Small Town Challenges
Small populations mean a smaller pool of potential tenants. When the local industry falters, vacancy rates skyrocket, leaving properties empty for months or even years. This unpredictability makes smaller towns a high-risk investment.
Better Alternatives
Look for areas with diverse industries and larger populations. Locations near employment hubs or cities with more than 100,000 people offer greater stability and long-term growth potential.
Streetscapes and Community Appeal
The streetscape and community dynamics of mining towns can also deter future buyers or tenants.
Lack of Owner-Occupier Presence
Mining towns are often dominated by rental properties, with transient populations that don’t maintain homes like owner-occupiers. This can lead to neglected streetscapes and reduced overall appeal.
Poor Long-Term Growth Prospects
Without a strong owner-occupier presence, these areas rarely see the same level of community investment and pride as larger, more balanced markets. This can further depress property values over time.
Finding the Best Suburb to Invest In
Instead of investing in mining towns, focus on regions with a diverse economy, strong infrastructure, and stable population growth.
Research Future Growth Indicators
Identify areas with planned transport corridors, major infrastructure projects, or expanding employment opportunities. These factors attract a balanced mix of renters and owner-occupiers.
Consider Larger Regional Centres
Regional cities with populations exceeding 100,000 often provide better investment opportunities. These locations typically have multiple industries supporting the local economy, creating more resilience during economic downturns.
mining townS GO busts!
This article from the ABC provides a great summary of mining towns that have boomed and busted, leaving not much behind. CLICK HERE
Final Thoughts ON mINING TOWNS
Investing in mining towns may seem tempting during a boom, but the risks often outweigh the rewards. A single-industry economy and small population make these locations highly volatile, with limited long-term growth potential. Instead, focus on regions with economic diversity, strong population growth, and community appeal. By choosing the best suburb to invest in, you can build a stable and profitable property portfolio for the future.
