Unfortunately, 2024 appears to be another tough year for Australian renters who endured financial strain previously. December 2023 marked a historic low in available rental listings, and the early weeks of 2024 witnessed median rents surpassing $600 for the first time. In this article we look at the latest property investment hotspots.

Although certain analysts suggest that a decrease in migration and more stable interest rates might alleviate rental growth this year, rental stress remains a significant challenge for many Australian tenants. According to CoreLogic, median rent now consumes 31% of the average income, surpassing the threshold for rental stress.

On the flip side, rental income is on the rise for property investors. Despite some landlords facing restrictions that curtail their earning potential, rental yield has climbed. Data from Your Investment Property Magazine reveals that certain Australian suburbs have even reached an annual rental yield of over 15%.

When it comes to comparing rental yields among capital cities, the choice is evident. According to Domain’s data, Sydney has experienced the most significant surge in both unit and house gross rental yields over the last 12 months, with an impressive increase of 29.5% and 13.2%, respectively.

“Unit rents reached a record high after the steepest quarterly and annual increase ever recorded in the city,” according to Domain’s chief of research and economics, Dr Nicola Powell. For houses, gross rental yields are at their highest point since December 2020 in Sydney, following the fastest annual surge on record.

Melbourne came in second, with unit yields at 23.6 per cent, and houses at 14.4 per cent, while Perth is in third place for units at 10 per cent and Brisbane third for houses at 12.9 per cent.

Unit yields:

  • Brisbane: 9.7%
  • Darwin: 8.4%
  • Hobart: 8.3%

House yields:

  • Hobart: 10.7%
  • Darwin: 6.8%

In the current market, the rental landscape in various suburbs presents a mixed picture. The top-performing area nationwide is Bass Hill, situated in Sydney’s Canterbury-Bankstown region, witnessing an astonishing annual increase in weekly unit rents of 62.8%.

What gives a suburb strong rental yield?

Rental yield is how much income a property generates relative to its value. It’s calculated by dividing the annual rental income a property generates by its market value.

When the value of a property increases dramatically, the rental yield can decrease, because the rental income is smaller relative to the property value, but that doesn’t mean the property is earning any less.

Therefore, rental yields tend to be higher in areas where the demand for rent is higher than the demand for owner occupied property. Take Tom Price in the Pilbara region of WA, where the average rental yield for houses was 15.2% in January ’24. In November and December of 2023, Tom Price had the highest yields for houses in the nation, dropping to third in January.

Pilbara is one of Australia’s biggest mining regions, with huge deposits of minerals like iron ore. Demand for property is therefore more transient, as miners come and go. From April ’23 to January ’24, the median house price in Tom Price went from $652,500 to $640,000, decreasing 1.9%. Over the same period, median rents went from $1,775 to $1,875, up 5.6%.

The majority of the suburbs in the top 100 lists lie outside of the capital cities of the respective states. For houses, only Anketell (Perth, 17th), Brisbane City (69th), Darwin City (76th), Gray (Darwin, 91st) and Moulden (Darwin, 94th) made the cut from capital city statistical divisions.

For units, as you’d probably expect, the capitals made a slightly better showing. There were 14 Greater Perth Suburbs, 11 from Darwin, three from Melbourne and two from Brisbane, with one each from Canberra and Adelaide that made the list. That still means well over half of the top rental yield suburbs came from regional markets.

Source: Domain, CoreLogic

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