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Booming prices push down yields

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While many investors welcome rising house prices across Australia, the upswing is causing rental yields to plummet, new information from RP Data reveals.

The research shows rents have failed to keep pace with prices in all capital cities, RP Data research analyst Cameron Kusher said.

“As a result of values rising faster than rental rates, gross rental yields have fallen over the past year across each capital city,” he said.

Sydney, Melbourne and Hobart were the only capitals were rental growth was greater from 2013 to 2014 than the year prior.

Nonetheless, Mr Kusher said Sydney and Melbourne were also the cities where rental yields saw the biggest downturn.

“These two cities also have the lowest yields of all capital cities at 3.9 per cent and 3.4 per cent respectively,” he said.

Sydney rents rose by 3.7 per cent in the past year, making it the only city where growth outstripped inflation.

By comparison, house prices in the city increased by 16.7 per cent since April 2013.

Rental growth slowed in the other five cities, with Perth seeing the biggest drop.

Asking rents in Perth fell by 0.5 per cent over the past 12 months, compared to an increase of 10.4 per cent in the year prior.

Mr Kusher said investors had remained active in the market despite shrinking rental returns.

“Rental growth has slowed markedly and rental yields are falling as value growth significantly outpaces rental growth,” he said.

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