The real estate market has recently witnessed a significant surge in rental yields, driven by low vacancy rates and increasing demand for rental properties. This trend, observed from late 2022 to early 2023, has benefited existing property investors and also presented lucrative opportunities for those considering real estate as an investment avenue.
National Rental Yield Trends:
The tightening of the rental market has led to a rise in advertised rent prices, subsequently pushing up gross rental yields. As of early 2023, gross rental yields stand as high as 9% in some suburbs, showcasing a notable increase from previous years. The national rental yields have experienced an upward trajectory, with advertised rent prices playing a pivotal role in this phenomenon.
Capital City Breakdown:
Breaking down the numbers, capital cities exhibit an overall increase in rental yields, with units and houses recording typical yields of 4.8% and 3.6%, respectively. These figures represent a 0.8% increase for units and a 0.4% increase for houses compared to August 2022 levels. It’s important to note that these gross rental yields are calculated before factoring in other costs like maintenance, rates, and leasing expenses.
Unit Yields Surpass Pre-Pandemic Levels:
Interestingly, for units, gross rental yields have surpassed pre-pandemic levels. This signifies a robust market for unit investments, showcasing the resilience of the real estate sector amid challenging times.
Regional Variations:
Rental yields vary significantly based on location, providing landlords in specific areas with larger returns on their investments. To identify these areas, an analysis of suburbs with the highest median rental yields was conducted.
Top-Performing Suburbs:
For houses, Moulden and Woodroffe in Darwin emerged as top performers, boasting median yields of 7.1% and 6.8%, respectively, based on the property’s value. Similarly, Camillo and Brookdale in Perth’s South East showcased high returns with rental yields of 6.8%. Medina in South West Perth also stood out, offering substantial yields for rental houses.
Darwin’s Dominance:
Historically, suburbs in Darwin have consistently delivered higher yields relative to other capitals. This can be attributed to a larger proportion of households opting to rent in Darwin compared to the national average (46.7% vs. 30.6%). This heightened demand for rentals contributes to the consistently higher yields in the region.
Perth’s Affordability Advantage:
Perth, too, is experiencing higher investment yields, mainly due to more affordable property prices. Exceptionally low vacancy rates have driven up rental prices in Perth over the past year, outpacing the capitals and contributing to enhanced yields. This affordability advantage positions Perth as a promising market for property investors.
Future Projections:
With vacancies expected to remain low in the short to medium term, the trajectory of rising rents is likely to persist. However, the pace of rent increases is anticipated to slow compared to the previous year. Rental yields are expected to continue their upward trend as tight market conditions prevail, making real estate an attractive proposition for investors.
Conclusion:
The current landscape of the real estate market paints a favorable picture for property investors, with rising rental yields creating opportunities for robust returns. The regional variations in rental yields emphasize the importance of strategic location selection for investors. As the market continues to evolve, keeping an eye on trends and emerging opportunities will be crucial for those looking to capitalize on the thriving rental property sector.
