While national rents increased by just 0.4% in the 12 months to the end of January 2019, the recent drop in house values has resulted in a jump in rental yields. With national dwelling values dropping by 5.6%, gross rental yields increased by over 4% in cities around Australia. This is the first gross rental yield increase of over 4% since May 2016.
The study, conducted by Core Logic, found that rental yields have increased in every Australian capital (excluding Hobart and Darwin) for the past 12 months. This comes after rental yields in Australia hit an all-time low in the growth phase that saw property prices skyrocket in Sydney and Melbourne. The lowest point for rental yields was 3.39% in August 2017.
Canberra had the strongest growth in rental yields in the past 12 months with yields growing by 5.6%. The rental yields of Australia’s other capital cities for the 12 months to the end of January 2019 were:
- Sydney – 3.4%
- Melbourne – 3.5%
- Brisbane – 4.6%
- Adelaide – 4.5%
- ACT – 5%
- Darwin – 6%
- Hobart – 5%
Core Logic’s Head of Research, Tim Lawless explained how the recent increase in rental yields is still below the decade average of 4.29%.
“The recovery back to average levels will be gradual, especially considering the weak rental market conditions across the cities with the lowest yield profile. Sydney gross yields are the lowest of any capital city at 3.4%, and rents were down 3% over the past 12 months.
“January can be a difficult month to read the housing market due to low levels of activity. However, the recent trend in housing market data has generally weakened over the past three months, with the pace of decline accelerating across markets already in their down phase, and growth generally moderating in other areas. Tight credit conditions, weakening consumer sentiment, less domestic and foreign investment and higher levels of housing supply are the primary drivers of the worsening conditions,” Lawless said.
In a time of uncertainty around housing values in Australia, this recent increase in gross rental yields provides some promising news for investors.