Australasia - a region of plenty.
There’s no doubt Australasia is a region of plenty, with a huge land mass (over several islands), an abundance of natural resources, and now, a thriving property market.
Its high property yields and lucrative real estate deals attract investors from all over the world.
Whether it's sandy beaches; mountain ranges; modern cities; or breathtaking views you're looking for - Australasia has it all.
Looking to invest yourself? Â Wondering what impact Covid, or the shifting economic sands are having on yields?Â
Let's dive right into rental yields and discover the best places in Australia and New Zealand to get in to local real estate.
First thing’s first; What is rental yield?
Put simply, rental yield is the return an investor is likely to receive on a property through renting to a third party.
In a technical sense, rental yield is the percentage of a property's value received through rental income over the course of a year.
Gross rental yield is the rent paid by your tenant, whereas the net rental yield is the amount you keep after deducting all your expenses, such as management, maintenance, rates, water, and insurance. Therefore, net rental yield is the profit you make when renting out a property.
If you own a $1,000,000 property and your tenant pays $50,000 per year in rent while you spend $10,000 in fees, you have a gross rental yield of 5% and a net rental yield of 4%.
Why do investors use rental yield?
1. To compare potential investments:
Since rental yield is the return an investor receives when renting out a property, the higher the rental yield, the more profitable the investment is.
When looking for a property to invest in, rental yield will help narrow down the search so that, theoretically, only the most profitable properties remain.
2. To set a monthly rent:
Investors often use gross rental yield to ballpark what the monthly rent for a property should be. This is done by rearranging the formula for gross rental yield.
"For example, assume a vacant home has an asking price of $135,000. If the gross rental yield from similar homes occupied by renters is 8%, an investor can determine what the monthly rent on the unoccupied home should be by rearranging the gross rental yield formula: "
Gross rental yield = Annual gross rent / Property value
Annual gross rent = Property value x Gross rental yield
$135,000 property value x 8% gross rental yield = $12,150 annual gross rent or $1,012 monthly rent
Sourced from: https://www.stessa.com/blog/rental-yield/
Australia
Let's explore the regions in Australia with the highest rental yield.
The following information was obtained from SQM Research.
Property yields for houses in Australia by region 2022
Note- All prices are in Australian dollars (AUD).
Highest rental yields for houses by suburb:
1. Zeehan and Queenstown-
Zeehan and Queenstown, in Tasmania, have the highest rental yield for houses at a whopping 9.4%.
The average house price is $157,000 in Zeehan, and the average monthly rent is $920.
The average house price in Queenstown is $165,000 and the average monthly rent is $1000.
2. Katherine East-
Second on the list is Katherine East with a gross rental yield of 8%.
Katherine East is a large country town close to Darwin (Northern Territory). It's average house price is $340,000, and the average monthly rent is $2000.
3. Adelaide (Elizabeth North, Elizabeth Downs and Elizabeth South)-
Elizabeth North, Elizabeth Downs, and Elizabeth South are all suburbs in Adelaide with a gross rental yield of between 7.1% and 7.4%.
The average house price in these three suburbs ranges from $213,000 to $220,000, and the average monthly rent is between $1140 and $1200.
4. Perth (Parmelia, Orelia, and Brookdale)-
Parmelia, Orelia and Brookdale are suburbs in Perth with a gross rental yield of 6.9%.
The average house price in these three suburbs ranges from $300,000 to $314,000, and the average monthly rent is between $1480 and $1520.
5. Gillen (Northern Territory), Armadale and Camillo (Perth)-
Gillen, Armadale, and Camillo have a gross rental yield of 6.8%.
The average house price in Gillen, a suburb in Northern Territory, is $477,500, and the average monthly rent is 2140.
Property yields for units in Australia by region 2022
Highest rental yields for units (apartments):
1. Parap (Northern territory) and Woodridge (Queensland)-
Parap and Woodridge top the list with a gross rental yield of 8.3%.
The average apartment price in Parap is $398,500, and the average monthly rent is $1880. The average apartment price in Woodridge is $195,000, and the average monthly rent is $1400.
2. Orelia (Perth)-
Orelia a suburb in Perth, has a gross rental yield of 8.1%.
The average apartment price in Orelia is $165,000, and the average monthly rent is $1040.
3. Slacks Creek (Queensland)-
Slacks Creek, in the City of Logan, has a gross rental yield of 8%.
The average apartment price in Slacks Creek is $215,000, and the average monthly rent is $1160.
4. Armadale (Perth) and Waterford West (Queensland)-
Armadale and Waterford West have a gross rental yield of 7.8%.
The average apartment price in Armadale, a suburb in Perth, is $250,000, and the average monthly rent is $1280. The average apartment price in Waterford West, a suburb in the City of Logan, is $220,000, and the average monthly rent is $1220.
5. Kelmscott (Perth)-
Kelmscott, a suburb in Perth, has a gross rental yield of 7.7%.
The average apartment price in Kelmscott is $255,000, and the average monthly rent is $1280.
Visit here for a more extensive list.
New Zealand
Please note: The following data is from December 2021.
The West Coast-
Okay, it's not a city, but this tranquil corner of the South Island was rated the greatest region for investors for the first time since mid-2020, so it deserves a mention.
The West Coast region now has an average rental yield of 5.4%.
The top three suburbs with the highest gross rental yields are all in Grey, a city in the West Coast region.
Invercargill-
When compared to some of New Zealand's larger centres, New Zealand's southernmost city provides lower costs, thriving farms, and a calmer pace of life.
Invercargill has fared pretty well since lockdown as a city with a robust economy that isn't particularly reliant on tourists. Invercargill, a commercial centre for the agriculture and dairy industries, now has an average rental yield of 5.6%.
New Plymouth-
Many New Plymouth residents work for Tegel, Fonterra, and the oil and gas industries, but there is a severe rental shortage.
New Plymouth is quickly establishing itself as a high-quality investment location, with a rental yield of 5.4% and a large number of attractive renters willing to rent.
Christchurch-
According to REINZ's Q1 Capital Gains and Rental Yields Report, Christchurch has a rental yield of 4%.
Dunedin-
Home of the University of Otago, with its 21,000 students, there are always young people looking for a flat in Dunedin.
Dunedin is a diverse city with job opportunities in a variety of industries. The hospital is currently undergoing a $1.4 billion reconstruction, demonstrating that this little community is experiencing significant growth.
The gross rental yield is up to 4.7%.
Stay tuned for part two in which we’ll cover the best property yields in the United Kingdom and Europe.
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