Highest rental yields seen in mining towns

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Five years after the downside of the mining-related property boom in the country, the sector was observed to be showing signs of rebound. CoreLogic‘s recent analysis revealed that mining towns are seeing steady housing values and increasing rents — generating some of the highest rental yields across Australia.

The Pilbara region of Western Australia and the Bowen Basin of Queensland were on the rise due to iron ore and coal prices, respectively. The Karratha council generated an 87% gain in housing values over the five years preceding the market peak in 2012. House values in Isaac Regional Council, on the other hand, climbed 72% within the same period.

CoreLogic Head of Research Tim Lawless confirmed that many of the mining regions are entering a period of recovery via the housing conditions. More importantly, home buyers and investors are being pulled into these areas because of housing values that are well below levels recorded the previous decade.

Rental vacancies have also dropped significantly, leading to higher rents. For instance, asking rents jumped by more than 20% over the previous year in some of the Bowen Basin towns.

Lawless also noted that increased rents against low housing values is pushing rental yields higher, with most of the towns potentially providing a positive cash flow from the outset. Gross yields usually remain above 6% in these regions.

While these regions post pleasing results, it is always important to be careful when deciding to purchase a property. “The economies of a mining region 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,” Lawless said.

He added that several factors can easily disrupt the current state of these areas. These include government policies, company policies around worker accommodation, shifts in the Australian dollar and appetite for trade with key trading partners.

For reference, The Reserve Bank of Australia reported that bulk commodity values tracked higher by 16.5% over the year in Australian dollar terms.  In addition, investment in minerals exploration has been consistently increasing since mid-2016, hitting the highest level since December 2013. This is advantageous in such a way that further infrastructure investment will be injected across the mining sector. Should everything go well, positive flow on effects for these mining regions are expected.

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