Rental yields across Australia just hit another record low

Tony Margiocchi/Getty Images

Australian house prices continued to increase at a decent clip in July, according to data released by CoreLogic today.

Across the capitals they increased by a combined 1.5% in weighted terms, assisted by continued a hefty 3.1% increase in Melbourne prices.

And with weekly rents growing at far slower pace, that meant that gross rental yields hit a fresh record low during the month.

“Across the combined capitals, the gross rental yield on a dwelling is now 3.1% with the lowest yields in Melbourne (2.7%) and Sydney (2.9%),” said CoreLogic following the release of its monthly Hedonic Home Value Index.

“Over the past five years, gross rental yields have compressed across every capital city apart from Hobart where yields are unchanged at a reasonably healthy 5.2%. The most substantial decline in rental yields has been in Sydney, where dwelling values are up 77.3% compared with a 15.5% rise in weekly rents.”

This chart shows the compression in gross rental yields over the past decade by individual capital city.

Source: CoreLogic

And this breaks down gross rental yields by type of dwelling across the nation’s capitals at present.

Source: CoreLogic

While the compression in yields mirrors that seen in other asset classes since the GFC, the fact they continue to decline despite steady interest rates suggests that expectations for further capital growth remain an important factor driving investor demand.

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