Rental yields predicted to drop

As vacancy rates creep upwards in all the major capital cities, a property analyst has warned investors their yields may soon begin to suffer.

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According to SQM Research, the rental market eased across the country over the past month as the national vacancy rate rose to 2.3 per cent.

Director Louis Christopher said the market was swinging in favour of tenants, causing rents to stagnate.

“While this is not yet a rout for landlords, it certainly is at a stage where rents will unlikely rise above inflation for the next 12 months,” he said.

He warned this could lead to a drop in returns.


“This means that rental yields will continue to fall, thereby reducing the net cash flows for new property investors in the market place,” he said.

Melbourne recorded the biggest jump in availability over the month as vacancy rates climbed from 2.3 per cent to 2.7 per cent.

The city has the highest vacancies of any capital, though the current rate remains 0.2 per cent lower than the rate in June 2013.

Perth, on the other hand, has seen a 0.2 per cent increase over the month but a 0.9 per cent jump over 12 months.

Darwin recorded a similar trend, with an increase of 0.2 per cent monthly and 0.8 per cent yearly.

Since May, rates rose by 0.2 per cent in both Brisbane and Sydney, bringing the total to 2.4 per cent and 1.9 per cent respectively.

Adelaide remained flat at 1.6 per cent while Hobart saw a 0.2 per cent drop in the period.

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