The increasing cost of buying property has cancelled out the gains from rising rents for investors, leaving yields trapped below 5% in most capital cities, according to Australian Property Monitors.
Rents rose strongly – by up to 23% in some places – in the past year because of strong demand but house prices have increased almost as strongly, with house prices rising almost 10% in the past year.
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The median house rents for Sydney have hit $400 a week, up 4% in the September quarter and 14% in the last year, while units have gone up to $380 a week. Yields were stuck at 4%, only slightly up on 3.8% a year ago.
Yields in Perth are lowest, improving from 3.1% to 3.4%, in the past year, despite a 23% increase in rents.
Yields are also lowest for Perth’s office rental market. Vacancy rates have hit 0.7%, for office space making it is the hardest place on earth to find vacant offices, according to Collier international’s latest Global Office Real Estate Review. Nevertheless, Perth was rated the lowest-yielding city, with an initial yield of 5.35%, compared to Adelaide with 6.97%, offering the highest yield for office property.
The best yield for landlords with houses in Australia is Hobart, where houses are cheapest and gross yields were 5.2% in September.