Property investing: A cautionary tale

'Property prices always rise' goes the old saying; Unfortunately no one told Queensland mining town Moranbah.

“Crack the champagne, cue the confetti and make noise: It’s Your Investment Property’s favourite time of the year again.

This issue we unveil the winner of the fifth annual Investor of the Year Award, where we honour Australia’s finest property investor as well as a handful of other investors who have made considerable achievements in their property investment adventures.

These are ordinary, everyday Australians who have chosen to make a difference in their lives through property investing. By showing fortitude, the willingness to take risks and a sense of the gigantic opportunity that is Australian property, they’ve strived ahead and offer a shining example of how to succeed.”

These ebullient words come from a 2012 copy of Your Investment Property Magazine. The winners, Kate and husband Matt Moloney, had indeed shown a willingness for taking on risk in the Australian property market. Unfortunately, it turned out to be something less than a gigantic opportunity.

The title of her book describing her ascent and subsequent fall - Bright Yellow Happiness – Finding Fulfilment from Financial Ruin - gives the game away. At the age of 24, Kate and Matt owned 20 properties. If they were to sell out completely now, they’d be three million dollars out of pocket, to which you can add interest arrears and transaction costs.

Yes, property investing has certainly made a difference to their lives, just not quite the difference they had hoped.

As an almost permanent property bear, I take no pleasure in Kate and Matt’s situation. They may have made a mistake but who hasn’t at such an age? And they seem to be dealing with the challenges with grace and intelligence. No, I have my eyes fixed on a bigger target.

In the year before Kate’s award, the Queensland Government's Office of Economic and Statistical Research reported Moranbah, then a booming coal mining town, as the most expensive place to live in the state. The collapse in the coal price has, presumably, put paid to that. Kate herself says that the ‘town’s real estate market has dropped approximately 75% in the last three years.’

The banks like to present themselves as cautious, prudent lenders happy to withdraw from a race for a quid if the risks are too great. But if that’s true, how did a young couple punting on property in a booming mining town that barely existed before the coal price went crazy get their hands on upwards of three million dollars? Makes you wonder doesn’t it?

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