API Magazine, Rental Yields

[voodoo]

Hello

I have been reading the Dec 03 / Jan 04 API magazine.

In the story "chasing those elusive rental yields" it has average weekly rent for the past 12mths at

Byron Bay was $635wk,
Bangalow $460wk
Ballina $415wk.

NO WAY...these figures cannott be correct, I live a bit south of these areas and these are not average weekly returns.

I would say $300wk max for average weekly returns in these towns.

If these are correct it is on resorts and holiday units but not housing.

Byron bay has very high unemployment, the average wage would be less than $300wk.

cheers

Oh by the way, Brenda and Les.......champions

 

[bicko]

yeah I agree, I grew up down there and still spend a lot of time there.
Unemployment seems to be the main industry down there, or it seems that way. There is only a certain level that the rents can get to, as incomes in NNSW don't meet the same averages as say Brisbane, the economy just isnt there.

 

[Brenda Irwin]

I usually take the reports with a grain of salt.

New housing estates and holiday rents can distort the levels.

Thanks for the comment Voodoo. Wait till ya get the next issue. Table of properties, debts, rents and market values. A bean counters delight!

 

[thefirstbruce]

Voodoo, my girlfriend has an acreage at Federal behind Byron, so I spend a lot of time down there.

I don't mean to be contrarian, as I often take these sorts of figures with a grain of salt too, however, I think you have to consider that if a high percentage of rental properties are holiday lets, then the figures will be skewed as in the API.

As far as I know, there are very few long term rentals in Byron and Ballina. Most is holiday rental stuff. Service industry workers are having to rent up at Bangalow, Mullum, and Rosebank. A lending officer at the Byron CBA bank can't even afford to rent in Byron.

What I am unsure of is whether vacancy rates are factored into weekly holiday letting yields, so that an annual average weekly yield is derived, rather than peak season yields.

The property industry has been distorting reality with statistics for eons. It isn't going to benefit them to change their ways.

 

[voodoo]

yes Brenda I am looking forward to part 2 sounds interesting.

thefirstbruce I would agree that Byron and Ballina must be mainly holiday rentals.

regards

Voodoo

 

[quoll]

Statistics!

I'm at work so can't get to the stats book from Uni but, from memory.

Average is the sum of all values divided by the number of values. So if 10 rentals are veiwed and 9 are at 100wk and 1 is at 1000wk the average is 181 almost twice what most are. The small quantity of extordinary rentals throw the results.

Median I think it is the middle figure so from a range of 100, 100, 110, 200, 400 the median is 110. Usually gives a more acurate figure when looking at rentals.

cheers
quoll

 

[Aceyducey]

Quoll,

Spot on on how the different measures work!

I'm thinking about a formula FAQ for the FAQ section, Average, Median, NPV, IRR, Cash-on-cash return, etc....

Brenda's point on new estates is well worth keeping in mind.

New estates are usually sold at higher prices and there are a lot of sales in a short-time frame so they push up the median a lot....then when the estate is sold the median price may look as if it falls again.

Cheers,

Aceyducey