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Property managers and BDMs wanting to help clients make solid returns on investment should consider pointing them to mining towns in Western Australia and Queensland, according to new CoreLogic data.
Mining towns are often ignored and seen as a terrible investment choice, but the latest analysis from CoreLogic has found some mining towns with significantly high yields — in one case up to 9.2 per cent.
While considered by most to have past, the resource sector is beginning to make a comeback. To match, the rental yields in these areas are some of the highest in the country, according to the latest edition of CoreLogic’s Property Pulse.
Tim Lawless, CoreLogic’s head of research, noted that conditions have long since peaked and infrastructure expenditure has winded down, which is driving the median values in these regions down.
Suburbs in Western Australia saw declines between 34.2 per cent in Boulder, with a median price of $380,392, and 84.2 per cent in Newman, with a median price of $250,376; and in Queensland these declines were between 22.7 per cent in Mackay, with a median price of $333,518, and 83 per cent in Dysart, with a median price of $102,860.
These suburbs, while well below their peak, are still experiencing, in most cases, modest growth over the last 12 months.
However, these suburbs are experiencing tight rental vacancies and are driving rental yields up, with most at or above 6 per cent.
The best rental yield performer in Western Australia was South Headland. With a median house value of $194,139 as of August 2018 and a decline of 6.5 per cent, this suburb is down 78.3 per cent from its peak, but is currently maintaining a gross rental yield of 9.2 per cent.
For Queensland, the top suburb for gross rental yield is the previously mentioned Dysart, with yield at 8.6 per cent.
The longer-term viability of these areas is likely to continue as well, Mr Lawless said, as the RBA has reported bulk commodity prices to be 16.5 per cent higher over the year.
If this continues, especially for coal and iron ore prices, the researcher believes more infrastructure could be provided for these areas.
“Investment in minerals exploration has been consistently rising since mid-2016, rising to the highest level since December 2013, which bodes well for further infrastructure investment across the mining sector,” Mr Lawless said.
“If that does eventuate, there should be positive flow-on effects for these mining regions.”
While these returns would bring a smile to any investor, Mr Lawless noted that the economies in these areas are “inherently shallow”.
“Asset values are highly dependent on the price of the commodity that lies under the dirt and the willingness of the private sector to invest capital in extracting it,” the head researcher cautioned.
“Government policies can disrupt conditions, as can company policies around worker accommodation, fluctuations in the Australian dollar and appetite for trade with key trading partners.
“Investing in these areas is high risk and investors should expect a high rental return to compensate for that risk.”
The list of notable mining suburbs, according to CoreLogic, are:
|
Suburb |
State |
Median house value (as of August 2018) |
Change over last 12 months (as a percentage) |
Decline from peak to August 2018 (as a percentage) |
Median rent |
Gross rental yield |
|
Baynton |
Western Australia |
$380,392 |
-1.9% |
-63.3% |
$550 |
7.9% |
|
Boulder |
Western Australia |
$205,502 |
-14.2% |
-34.2% |
$330 |
7.4% |
|
Bulgarra |
Western Australia |
$270,273 |
-3.4% |
-66.1% |
$380 |
6.8% |
|
Millars Well |
Western Australia |
$269,644 |
-0.7% |
-72.7% |
$395 |
7.9% |
|
Newman |
Western Australia |
$250,376 |
16.1% |
-84.2% |
$360 |
4.6% |
|
Nickol |
Western Australia |
$351,002 |
1.3% |
-71.3% |
$420 |
6.9% |
|
Pegs Creek |
Western Australia |
$256,575 |
-6.6% |
-68.4% |
$425 |
7.5% |
|
Port Hedland |
Western Australia |
$437,853 |
0.8% |
-65.8% |
$600 |
8.0% |
|
South Hedland |
Western Australia |
$194,139 |
-6.5% |
-78.3% |
$350 |
9.2% |
|
Clermont |
Queensland |
$262,107 |
-1.3% |
-35.8% |
$275 |
6.2% |
|
Dysart |
Queensland |
$102,860 |
1.5% |
-83.0% |
$180 |
8.6% |
|
Emerald |
Queensland |
$278,630 |
10.4% |
-37.2% |
$330 |
6.0% |
|
Moranbah |
Queensland |
$217,661 |
5.6% |
-71.7% |
$300 |
7.4% |
|
Nebo |
Queensland |
$215,182 |
13.5% |
-47.6% |
$250 |
7.8% |
|
Gladstone |
Queensland |
$272,455 |
-7.9% |
-41.9% |
$240 |
4.5% |
|
Mackay |
Queensland |
$333,518 |
3.4% |
-22.7% |
$350 |
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