The average gross rental yield for a capital city dwelling is now 3.7 per cent, down from 4.3 per cent 12 months ago.
CoreLogic RP Data believes this is largely due to consistent high rates of dwelling growth relative to rental growth.
Melbourne recorded the lowest gross yield of 3.3 per cent, while Sydney recorded 3.6 per cent.
“If we see Sydney dwelling values continuing to outpace rents so quickly we may see Sydney take over Melbourne to show the lowest gross rental yields,” CoreLogic RP Data’s head of research Tim Lawless said.
Australia’s combined capital cities recorded a 0.3 per cent dwelling value rise last month, according to CoreLogic RP Data’s February Home Value Index.
It brings the combined capital city dwelling values up 2.5 per cent over the rolling quarter and 8.3 per cent higher over the past 12 months.
The data shows Sydney remains the frontrunner, with dwelling values 13.7 per cent higher, while Melbourne and Brisbane grew 7.4 per cent and 5.9 per cent respectively.
In other capital cities, dwelling values increased by less than four per cent.
Overall the monthly rate of growth slowed from 0.9 per cent in December and 1.3 per cent in January; however Mr Lawless predicts the growth trend will remain strong, particularly in Sydney and Melbourne.
“The slower rate of capital gain in February may come as a surprise to some who were expecting lower mortgage rates to instantly propel the pace of home value growth higher,” he said.
“We are already seeing the effect of lower mortgage rates, with auction clearance rates surging to the highest levels we have seen since 2009 and valuation activity across CoreLogic RP Data valuation platforms reaching new record highs based on daily averages over the second half of February.”
Mr Lawless noted that despite the burst of activity, it will likely take some time to see this flow through to a higher rate of capital gain.
“We might not see the lower interest rate environment stimulate the housing market as much as it has in the past,” he said.
“Weaker jobs growth, higher unemployment, declining affordability, low rental yields and political uncertainty are all factors that could dent consumer confidence and provide some counterbalance to the rate cuts and quell any additional market exuberance.”