It's not a mining boom. It's not a population boom. Rather, it's a residential property boom.
The small regional town of barely 10,000 people is just one of several towns along Queensland's Bowen triangle, which is emerging as one of the hottest residential investment spots in Australia.
Driving this prosperity has been a gush of mining activity, combined with billions of dollars' worth of infrastructure projects planned or in progress in the nearby Gladstone region.
Mining companies are snapping up accommodation for their employees at rents of about $200 a room, providing investor returns of about 8 per cent.
Yes, the mining boom is deflating, an added risk if investing in these areas. But Property Investors Association of Australia president John Moore, who has been monitoring the property boom in the region, says: "The likelihood that capital growth will continue in Moranbah is high."
According to data from RP Data, he says, the five-year growth rate has been 241 per cent up to December last year. "When you consider the number of projects that are going to be implemented in the area, it certainly augurs well for continued growth in both population and capital growth in the area," he says.
The Moranbah story represents just one small pocket on the national residential investment map that is luring back investors despite the carnage taking place across parts of the property market.
Prices across the board have come off about 8 per cent in the past year. Hardest hit has been the upper end of the residential market, with values coming off as much 20 per cent to 30per cent in some of wealthy suburbs, such as those on Sydney's lower north shore.
If you believe some pundits, there is much more to come in price falls as the local economy plunges into recession and distressed sales rise on the back of job losses.
The latest Australian Bureau of Statistics housing finance figures reveal the total value of dwelling finance commitments, excluding alterations and additions, rose 1.3 per cent in February, seasonally adjusted. However, housing investment commitments fell 2.8 per cent in the month.
Despite that, real estate agents and industry watchers say they are witnessing a shift in sentiment among cashed-up investors. Investors are moving in on once-in-a-lifetime investment opportunities emerging in Sydney and Melbourne or seizing on houses and units offering high yields in Darwin, Canberra and Sydney.
Indeed, it is the yield play that hasbecome the key attraction for many investors.
Partly fuelling that momentum in rents has been the slump in housing and unit construction. Building approvals have been down substantially in the past few months but there was a kick in February, with ABS numbers showing a 7.8 per cent rise.
Investor appetite also has been seen at the lower end of the housing market. RP Data national research director Tim Lawless says investors are targeting mostly the same stock that first home buyers are targeting, "affordable, fringe markets that are offering a pretty low entry price with relatively high rental rates".
Ray White Group chairman Brain White says: "There is confidence in rentals. Probably of all asset classes, residential rentals have been almost the only ones showing positive gains over the inflation rate and there is no evidence of that tapering away."
He says that confidence is being reflected in reserve prices at auction being exceeded. "There is confidence that there's a floor in prices," with the exception of a few pockets, he adds.
Perhaps the most telling number for the property veteran is the group's March sales volume numbers (comprising volume and value), which soared 20 per cent in the month.
Investors were almost nonexistent in the market last year, he says, accounting for only 10 per cent of its total sales. That figure now is hovering at about 20 per cent.
"I've been hearing people talk for the last couple of years what's going to happen and they've all been wrong," White says. "There's a wreckage of failed forecasters. The only comment we can make is that there's a strong demand for the lower-ranged properties and that demand is being reflected ... in auctions. That's a fact, that's not a prediction."
Rowan Wall, a director at property investment group Eclipse who isn't a fan of residential investment at the moment, notes that "nearly every mum and dad has been scared out of the stock market" and that is helping to drive interest in property.
By his reckoning, self-managed superannuation funds were the second biggest group of buyers in the residential market, behind first home buyers.
"As more and more banks offer finance for super funds ... there will be an increasing demand from the DIY superannuation funds," he says.
But on the flip side, he argues, there are many risks attached with property in do-it-yourself super funds, including vacancies and having to remove tenants if they don't keep up the rent. "The law is usually on the side of the tenant ... and you (the owner) pay all the outgoings," he says. "A classic thing in the current market place is that although property values in many cases are falling, land tax liabilities, because they lag, are going up. You could have high expenses such as land tax that you can't pass on to your tenants. I wouldn't be recommending that (self-managed super funds) go into residential property."
BT Financial Group head of investment solutions Patrick Farrell says: "Back in June 2007, when we had the $1 million deposit into super, a lot of people actually sold their investment properties and looked to put it into superannuation." Many now are looking to reinvest some of that in property, he says.
From a diversification strategy, he says, "I think it's not a bad deal".
But despite the attractive fundamentals, one key part of the equation may start to head in the wrong direction: interest rates.
Many market observers believe we are approaching the tail end of this downward cycle in rates and that the Reserve Bank of Australia may not lower official cash rate much more beyond 3 per cent. If interest rates went up, leveraged investors could find themselves in trouble.
Consensus among economists is that interest rates could decline to about 2 per cent this year, with a possible upward trend emerging as early as next year.
For Moore, the Gladstone region is "the one that's going to move ahead quite dramatically over the next five years". Such is the demand in the region, he says, that the average time on the market for those properties for sale is 27 days.
But one important risk about buying in a mining town is that "mining has got a limited life in a particular area", which means people move on and values fall. Last week, Rio Tinto announced it would cut 500 jobs in the city of Gladstone.
Moore also calls Darwin an investment hot spot, largely because of the infrastructure projects under way, and adds that Adelaide also may do well in the future.
Lawless says Sydney and Melbourne are the two cities showing the strongest signs of growth, along with Darwin.
