The five high-yield property no-go zones investors should avoid

“The question isn’t what the yield is. The question is why it’s high,” Mr Dave said. His point is that a yield rises either because rents go up or because prices fall, and investors need to know which is happening.

The five no-go zones

Location	Type	Median price	Gross yield	10-year growth
Carlton, VIC	Units	$325,000	8.9%	-43%
Haymarket, NSW	Units	$955,000	5.9%	-13%
Parkside (Mount Isa), QLD	Houses	$265,000	9.3%	-10%
Roxby Downs, SA	Houses	$265,000	7.6%	+6%
South Hedland, WA	Houses	$550,000	11.6%	+63%

Source: High Income Property analysis of Cotality data.

Inner-city units top the list

The surprise in the research, Mr Dave says, is that inner-city units rather than outback towns make up much of the no-go list. Carlton units in Melbourne lead it, with an 8.9% gross yield on a $325,000 median that is down from $569,000 in July 2016. The briefing notes put rent at $570 a week and the five-year fall at 35%, and say Melbourne 3000, Docklands and Southbank show the same pattern.

In Sydney, Haymarket units yield 5.9% but remain 13% below their 2016 median, the analysis says, with nearby Chippendale 15% below and Ultimo 9% below. All three have recovered over five years, which Mr Dave says is exactly when buyers get drawn back in, even though a ten-year owner is still behind.

He also says many investors stop at the gross yield figure and do not account for insurance, council rates, vacancies and maintenance.

Mining towns and the timing trap

Parkside in Mount Isa (9.3% yield, 38 house sales a year) and Roxby Downs (7.6% yield, reliant on the Olympic Dam operation) make the list because one industry or employer drives tenant demand and resale, according to the briefing notes.

South Hedland is the outlier. It is up 63% over ten years and yields 11.6%, but the analysis includes it because its median fell 42% between 2016 and 2018, from $337,500 to $195,000. Mr Dave calls it a warning about timing rather than a current loss.

The five alternatives

Location	Type	Median price	Gross yield	10-year growth
Berserker (Rockhampton), QLD	Houses	$535,000	5.6%	+149%
Lavington (Albury), NSW	Houses	$634,000	4.5%	+149%
Morwell (Latrobe Valley), VIC	Houses	$420,000	5.2%	+171%
Elizabeth North (Adelaide), SA	Houses	$560,000	4.6%	+239%
Carey Park (Bunbury), WA	Houses	$600,000	5.2%	+111%

Source: High Income Property analysis of Cotality data.

The alternatives were picked for a price at or near the no-go suburbs, a gross yield of 4.5% or better, strong five and ten-year growth, a deep sales market and more than one local industry, according to the briefing notes.

In Queensland, Berserker in Rockhampton has a $535,000 median, a 5.6% yield and rent of $520 a week, up from $215,000 in 2016. The notes credit a mix of beef, health, education and defence, and 209 house sales a year.

Mr Dave sets Elizabeth North against Roxby Downs: 239% growth over the decade with a 4.6% yield, compared with 6% growth in the mining town. The notes flag one caveat on Morwell, where the Latrobe Valley is working through power station closures.

His conclusion is that investors should target the best mix of yield, capital growth and long-term resilience rather than the highest yield. Mr Dave is available for interview through Bricks & Mortar Media.