Yields rise as rental gains outpace price growth

Rental yields across all capital cities and property types have grown over the June quarter as rents reach new record highs.  

Data from Domain showed that house and unit rental yields posted an overall increase across capital cities, up by 0.9% and 3.0%, respectively.  

On an annual basis, house yields declined by 0.9% while unit yields increased by 6.3%. 

Darwin continues to be the highest-yielding capital city for houses and units. It is worth noting, however, that Darwin reported a decline in unit rents for the first time in two years. 

Meanwhile, Canberra’s gross rental yield grew for the first time in more than a year, thanks to its unit rents rising at the quickest pace since 2011.  

Domain chief of economics and research Dr Nicola Powell said the increase in rental yields came as rents hit their strongest annual growth in around 14 years.  

“Purchasing prices are faring weaker than rents and boosting yields so it is a good time for investors to get into the market,” she said.  

“We need to continue to see an increase in investor activity, address the supply of social housing and ensure we have the right government incentives for first home buyers — this will no doubt have a positive impact on easing rental conditions.” 

Rising rents reach record high 

Rents across capital cities and property types increased over the quarter and annually except for Darwin, which posted no quarterly movement in house rents and a 2% decline in unit rents.  

“The numbers that we’re seeing are a result of a combination of high purchasing prices locking people into the rental market longer, increased home loan costs being passed onto tenants, weaker investment activity throughout 2019-20, fewer building completions, greater household formation, investors cashing in on the recent price boom, and rental demand being boosted by the return of international students and overseas migration,” Dr Powell said.  

While the rental market remains competitive, Dr Powell said the increased investment activity has helped ease some pressure on tenants, with national vacancy rates holding for the fourth month and the choice of rentals inching higher over June.

“This, together with new first home buyer government incentives such as ‘Help to Buy’, has the potential to assist the transition of more tenants becoming homeowners, easing some of the demand pressures that the rental market is currently facing,” she said. 

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