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Rent yields
10 Dec 18

Rental Yields Slowly Recovering

Nationally, gross rental yields are picking up from previous record lows, rising from 3.71% in October last year to reach 3.87% in October 2018. Despite the subtle rise, gross rental yields remain well below their decade average of 4.31%.

A recovery to average levels is likely to take some time, considering national rents have remained relatively flat over the year to date and are only 0.8% higher over the past twelve months.

Rental yields reached record lows in late 2017 due to values consistently rising at a much faster pace than rents through the growth phase. Rental yields were compressed more significantly in Sydney and Melbourne, reaching record low readings of 3.04% and 3.07% respectively in 2017. These cities are still recording the lowest yield profiles at 3.24% and 3.34% at the end of October 2018.

Rental yields are the highest in Darwin at 5.7% and Hobart at 4.9%, however both cities are seeing rental yields trend lower as dwelling value movements outpace rental movements.

House prices to bounce back over 2019

House prices are anticipated to fall further in the first half of 2019 before returning to growth of about 1 % over the year to December 2019. Despite Corelogic’s November House Value Index showing 

national dwelling values slipped 0.7% in November, the latest Domain forecasts suggest that the next growth cycle is just around the corner. Its predictions are for house price growth to soon recover, increasing by 1% by the end of 2019 and by a further 4% over the year to December 2020.

Domain says low clearance rates, falling home loan approvals and a rising stock of listings suggest prices will continue to fall in the months ahead, and Corelogic indicates it expects house prices to finish the year 4.2% lower than last October’s peaks.

Monthly change in capital city values

Sydney and Melbourne values fell by 1.4% and 1% respectively in November. However, values trended higher across 5 out of 8 capital cities.

                                 MONTHLY           ANNUAL

  • Hobart                    s0.7%                  s9.3%
  • Darwin                    s0.7%                  t0.8%
  • Canberra               s0.6%                  s4%
  • Adelaide                s0.1%                  s1.4%
  • Brisbane                 s0.1%                  s0.3%
  • Sydney                   t0.7%                 t8.1%
  • Melbourne             t1%                   t5.8%
  • Perth                       t0.7%                 t4.2%

Unit prices to bottom in early 2019

According to Domain, Unit prices are anticipated to bottom out in early 2019 after falling by 3% over the year to December. Prices are then anticipated to grow by 2% in 2019 and 3% in 2020.

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