Rental yields cannot keep up with Melbourne, Sydney price growth

Rental yields across Australia’s two biggest cities Sydney and Melbourne are currently seeing a record low due to the capital growth of those markets. Great news if you received property investment advice early on but this very low yield increases risk for property investors looking to enter into those markets at this late stage. It is a case of “you have missed the boat” I am afraid.

In the past we have seen a huge increase in price of housing in Melbourne and Sydney, on average what cost $500,000 just a few short years ago is now reaching over $1,000,000 with this price increase rental yields haven’t been able to keep up. On average, the net annual cost of servicing a property investment on a median priced three-bedroom house in Sydney funded with an 80% loan to value mortgage was $41,300 as of December 2015, up 78% from just three years earlier. In Melbourne the cost was $26,674, up 63% in the same time frame.

Rather then try and get into Sydney and Melbourne at this late stage, clever investors are looking to the north with the Gold Coast and Brisbane holding their rental yields.