Ensure you never miss an issue of the
real estate business bulletin
Capital gains outpacing rental growth

Capital gains outpacing rental growth

by Staff Reporter 0 comments

Rental yields were down over the month, with capital gains continuing to outpace rental growth, according to RP Data.

The RP Data-Rismark July Hedonic Home Value Index Results showed the typical gross rental yield on a capital city dwelling fell to 3.9 per cent in July, from four per cent in June.

Melbourne yields were the lowest of any capital city at 3.4 per cent gross, followed by Sydney at 3.9 per cent.

RP Data research director Tim Lawless said despite the low yielding environment, the total returns on housing have been strong thanks to the level of capital gains.

The RP Data Rismark Accumulation Index, which combines the level of capital gain with the gross rental returns, is showing a 14.7 per cent total return over the past 12 months, led by Sydney at 19.5 per cent and Melbourne at 14.9 per cent.

The lowest total returns have been recorded in Hobart and Canberra where the combination of capital gains and rental yield provided a 6.5 per cent gross return across both cities.

According to Mr Lawless, the housing market is set to record further capital gains. However, he said that it is likely that growth rates will continue to taper in trend terms back to a more sustainable level.

“With interest rates remaining low and fixed rates seeing a further downwards pressure, we are expecting that capital gains will continue into the foreseeable future,” he said.

“What is likely though is that the rate of capital gain will continue to reduce, particularly in those cities where affordability constraints are the most significant and rental yields are the lowest.

“Low yielding market conditions in Sydney and Melbourne are likely to act as a disincentive to investors, as well as the fact the markets are well advanced in their growth cycle,” he added. 

Capital gains outpacing rental growth
lawyersweekly logo
promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

The REB Top 100 Agents ranking is the foremost ranking of agents in Australia. It has set the bar for excellence in Australian real estate. To be ranked as an REB Top 100 Agent is the standard real estate professionals strive for. See the full 2018 ranking here!

featured podcast

featured podcast
An industry where the resilient succeeds

Tim Heavyside believes that a strong support team and good foundations are paramount to success in the real estate industry, and with regu...

View all podcasts

Would you consider working for Purplebricks or a similar 'DIY' model?

Yes (7.2%)
No (80.9%)
Perhaps - make me an offer (12%)

Total votes: 209
The voting for this poll has ended on: July 13, 2018
Do you have an industry update?