The 'highest yielding suburbs' are almost identical to my 'worst places to buy in Australia' list

The 'highest yielding suburbs' are almost identical to my 'worst places to buy in Australia' list
Terry RyderDecember 7, 2020

People keep lining up to win my coveted “misinformation of the year” award. New contenders have nominated themselves with the publication of a list that purports to name the 10 best places to buy for high yields.

This one is also in the running for “most humorous material masquerading as research”.

The funny thing about the 10 best-yielding locations list, published by CoreLogic RP Data, is that it’s almost identical to my “worst places to buy in Australia” list.

As part of the Price Predictor Index, which generally charts rising markets around the nation, I publish what I call The Dirty Dozen – the 12 worst places to buy. These are places where the market is in serious trouble, with sales activity falling, followed inevitably by price decline.

The Top 10 rental yields list from CoreLogic includes five of my Dirty Dozen. Four others listed as high yielding were serious Dirty Dozen contenders but narrowly missed the cut.

They’re all places with massive vacancies, falling rentals and declining markets. The only place on the Top 10 rental yields list worthy of consideration by investors is Broken Hill.

Number one on the Top 10 rental yields list was Miles in Queensland. This was a truly tragic choice because the property market in Miles is the biggest basket case in Australian real estate, bar none. One in three properties is vacant. Even Moranbah is doing better than this.

To suggest you can get a 9.8% rental yield in Miles is laughable. The rental yield for most landlords out there is zero. You can’t have a yield if you can’t find a tenant.

Here’s what I wrote in The Dirty Dozen: “The property market in Miles has been effectively destroyed (by developer oversupply). Vacancies are now 30% and the median house price has dropped 27% in the past 12 months. It now takes six months, and discounting around 20%, to sell a house. In the past five quarters, house sales in Miles have dropped from 24 to 15 to 12 to six to one.

“It’s little better in Chinchilla, where sales volumes have dropped from 78, to 51 to 40 to 27 to 19 in the past five consecutive quarters and the median house price is down 10%. The vacancy rate in Chinchilla is now 19%, according to SQM Research. Another market to vanish without trace is Wandoan, where there have been just two sales in 2014.”

Number two on the Top 10 high yields list was Newman in Western Australia. The vacancy rate in Newman is 11% and typical rents are now less than half their peak levels. Rental yields, previously in double digits, are now 5.3%, according to Australian Property Monitors – not the 9.8% quoted by CoreLogic.

Kambalda East came in at number three and Kambalda West was number eight. The two Kambaldas together have a vacancy rate a tick under 20%. Good luck achieving the 8.9% rental yield claimed by CoreLogic.

Queenstown in Tasmania was number four on the list. Here’s my report on Queenstown: “If there’s a more depressing town in Australia, or a more depressed property market, please tell me about it. This town in Tasmania’s wild west resembles the film set for a western movie, with tumbleweeds in the main street.

“The median house price ($90,000) says a lot. It’s been as low as $70,000 this year, which was lower than it was five years ago, having dropped an average of 3% per year since 2009. The typical house on the market takes seven months and discounting around 15% to sell. The vacancy rate is 17%, according to SQM Research. The mid-year closures of the Mt Lyell copper mine and the Henty gold mine, with the loss of hundreds of jobs, haven’t helped.

“Nearby towns Zeehan and Rosebery are equally depressed, with a vacancy rate around 25% in Zeehan. You can buy cottages for under $50,000, not that there’s a reason to.”

The Top 10 list also includes other seriously declining markets about which I have written recently, like South Hedland, Port Hedland and Karratha, which has recorded the biggest decline in prices in WA (down 40%), according to the Real Estate Institute of Western Australia.

The problem with this kind of sloppy “research” is that it’s picked up by media and repeated as credible information. Local media has reported these locations as being as among the nation’s leading hotspots.

Anyone silly enough to act on the interference that these are good places to invest will end up, in many cases, without any yield at all.

You can contact Terry via  email or Twitter. 

Photo: Michael Sigrist/CC BY-SA 3.0.

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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