Property rental yields fall across all capital cities
The 2013-2014 dwelling price upswing has triggered a significant drop in rental yields, according to RP Data.
Their research shows rents have failed to keep pace with prices in all capital cities, RP Data research analyst Cameron Kusher noted.
“As a result of values rising faster than rental rates, gross rental yields have fallen over the past year across each capital city,” he said.
Sydney and Melbourne were the only mainland capitals were rental growth was greater from 2013 to 2014 than the year prior, but were also the cities where rental yields saw the biggest downturn.
“These two cities also have the lowest yields of all capital cities, at 3.9% and 3.4% respectively,” he said.
Sydney rents rose by 3.7% in the past year, making it the only city where growth outstripped inflation.
By comparison, house prices in the city increased by 16.7% since April 2013.
Rental growth slowed in the other five cities, with Perth seeing the biggest drop.
Asking rents in Perth fell by 0.5% over the past 12 months, compared to an increase of 10.4% in the year prior.
Kusher said investors had remained active in the market despite shrinking rental returns.
“Rental growth has slowed markedly and rental yields are falling as value growth significantly outpaces rental growth,” he said.
The May RP Data-Rismark Home Value Index reported that combined capital city home values increased by 11.5%. At an individual capital city level, value growth ranged from 1.2% in Canberra to a 16.7% rise in Sydney.
Australia’s combined capital cities recorded an increase in rental rates of 2.4% over the past year.
Sydney, Melbourne and Hobart were the only capital cities where rental growth was greater over the past 12 months than for the previous 12 months. At the other end of the spectrum, growth slowed across five of the eight capital cities with Perth experiencing the most extreme slowdown.
Over the 12 months to April 2013, Perth rental rates had increased by 10.4% compared to a -0.5% fall over the most recent 12 months.
Kusher suggests that most investors must be chasing capital growth rather than rental return.
