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25 May 2018

Beauty is in the eye of the beholder

 

A long, long time ago (when animals could still talk), they held a competition to see whose babies were the most attractive. All the animals were proud of the way that their offspring looked, so each was confident of winning. They assembled in flocks and herds and made an enormous fuss as each parent showed off her baby.

Among them came a monkey, carrying her little baby in her arms. It was a hairless, pink, flat nosed, ugly little thing and when the other animals saw it, they burst into laughter. But, the mother monkey just hugged her baby even more tightly and said, “You may award your prize to whoever you like, but I will always think that my baby is the most attractive of them all”.

The moral of this story is that beauty is in the eye of the beholder and it offers a valuable tip for property investors. You may think that a certain suburb is unattractive, but that’s not relevant. What matters is whether the people who live there think it is.

Risdon Vale is an outer suburb of Hobart and it’s also where Tasmania’s maximum security male prison is located. It’s not what most would call an attractive place. The area is dominated by massive walls skirting the jail’s perimeter, topped with coils of razor wire and the night sky is penetrated by floodlit guard towers and the howling of ferocious guard dogs.

Coupled with the constant threat of rampaging escapees running amok through the town, surely here is a place that could be called “unattractive” and deter any potential residents.

Yet, here’s the thing, Risdon Vale has the highest housing rental yield in Hobart and it’s driven by genuine rental demand. The source of housing demand comes from the wives and partners of the inmates, who rent properties in Risdon Vale to be near their incarcerated loved ones for conjugal and family visits. The irony is that the higher the incidence of burglaries, murders and other serious crime in Tasmania, the greater will be the demand for rental properties in Risdon Vale.

Other examples are mining towns and ports such as Weipa, Roxby Downs, Mount Isa and Cobar which are located in regional outback areas. Even though they are typically hot, dry, dirty, dusty remote centres, they are extremely attractive to some people.

This is because they offer high wages for hard work. These towns give some people the opportunity to get a good financial start and others the chance to get back on their feet after a personal or financial set back. While many workers achieve their aim and leave after a few years, others find solid new friendships in the unique camaraderie of mining towns and never leave.

The importance for investors is not that you might find such places dirty or dangerous and that you wouldn’t want to live there - what matters is whether they have attractions for others.