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Rental yields take a dive

20 January 2010 Reporter

Rental yields have declined in some parts of Australia as a result of strong first home buyer activity.

According to RP Data’s latest Property Pulse update, rental yields in resource-rich towns fell dramatically last year, specifically in the mining town of Collinsville in North Queensland.

The town saw housing yields drop by 2.4 per cent from a yield of 9.1 per cent last year to 6.7 per cent.

RP Data’s research analyst Cameron Kusher said rental yields had eased in most Australian suburbs last year thanks to strong activity in the FHB market and an increase in property prices.

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“With property prices higher and rents on par or even lower than what they were a year ago, the return from the property investment is generally not as strong as it was 12 months ago,” Mr Kusher said.

“In places like Collinsville, the median rental rates in the suburb have fallen by 20 per cent during the year while house prices have actually increased by 8.7 per cent.”

But despite the drop in gross rental yields, Mr Kusher said higher interest rates expected later this year would have an effect on the number of first home buyers looking to enter the market.

“As a result of this, the rental market is expected to tighten creating upwards pressure on rental rates and in turn improving gross rental yields,” he said.

Rental yields take a dive
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