Where in Australia is the most lucrative for property investors? Move over scary devils, Tasmania has a new claim to fame – good rental returns.
New data released by CoreLogic RP Data shows Hobart is currently delivering the best average gross rental yields of any Australian capital city, for both houses and units.
A property’s gross yield is calculated by taking the annual rental income, dividing it by the property value, and then multiplying it by 100. For example, a property which earns $375 a week in rent, for a total of $19,500 a year, on a property purchased for $450,000, returns 4.3%.
Net yield figures account for expenses. A combination of low house prices and rising rent leads to higher yields.
The data shows Hobart, where the average house costs $398,522, at the top of the list for houses, with a 5.5% yield. It’s also best for units, which cost on average $305,592, with a 5.8% yield.
The suburbs of Gagebrook (9.2%), Bridgewater (8.6%), Risdon Vale (8.5%) and Clarendon Vale (8.2%) lead all comers when it comes to houses.
For units, the suburbs of Rokeby (7.7%), Bridgewater (7.6%), Claremont (7.3%) and Montrose (7%) are the top performers.
For houses, the next best performing city is Darwin (4.8%), followed by Adelaide (4.6%), Brisbane (4.5%), Canberra (4.4%) and Perth (4.1%). The investor hot spots of Melbourne and Sydney – where property values are highest – round out the list with 3.3% and 3.2% respectively.
Canberra, where the average house costs $434,371, is second behind Hobart when it comes to yields for units, with 5.4%. The nation’s capital is followed by Darwin (5.3%), Brisbane (5.2%), Adelaide (5.1%) and Perth (4.4%). Again, Melbourne (4.4%) and Sydney (4%) bring up the rear.
REA chief economist Nerida Conisbee says Tasmania has been on “the up and up” for several years, with Hobart the most in-demand city for buyers and renters.
“This is based on the economy moving from having a government and agricultural focus to tourism – which has really taken off – and strong growth in the education sector, with the state promoting itself heavily to overseas students and attracting Chinese investment,” she says.
“It’s also the cheapest capital city in Australia to buy in. There isn’t a single suburb in Hobart where the median is $1 million, which is seen in other capitals, so that’s a factor,” Conisbee adds.
Coming off a low base (house price-wise) and with an increasing number of people looking to rent, higher yields are the result, she says.
While yields are attractive, investors should think carefully about which capital is best.
“It depends what kind of investor you are. Are you looking for capital growth or rental return? Of course strong yields are great, but many investors buy where the yield may be lower, but they bank on the fact the property itself will increase in value,” Conisbee says.
Hobart also the cheapest capital city in Australia to buy in, with no suburb with a median over $1m. Picture: realestate.com.au/buy
Highest rental yields in Australia’s capital cities (houses)
Highest gross rentals (houses) in capital cities – city, state, median value, median weekly rent, gross rental yield;
- Hobart, TAS – $398,522 – $380 – 5.5%
- Darwin, NT – $570,636 – $525 – 4.8%
- Adelaide, SA – $458,013 – $360 – 4.6%
- Brisbane, Qld – $534,593 – $415 – 4.5%
- Canberra, ACT – $674,799 – $525 – 4.4%
- Perth, WA – $510,988 – $370 – 4.1%
- Melbourne, VIC – $804,316 – $420 – 3.3%
- Sydney, NSW – $1,105,954 – $530 – 3.2%
Highest rental yields Australia-wide (units)
Highest gross rentals (units) in capital cities – city, state, median value, median weekly rent, gross rental yield;
- Hobart, TAS – $305,592 – $320 – 5.8%
- Canberra, ACT – $434,371 – $420 – 5.4%
- Darwin, NT – $401,179 – $400 – 5.3%
- Brisbane, Qld – $390,708 – $385 – 5.2%
- Adelaide, SA – $336,297 – $310 – 5.1%
- Perth, WA – $409,421 – $325 – 4.4%
- Melbourne, VIC – $539,810 – $400 – 4.4%
- Sydney, NSW – $771,919 – $530 – 4%
