Last week, SQM Research released data showing that rental yields have failed to materially rise, despite the heavy falls in dwelling values:
However, due to the sharp fall in mortgage rates, SQM Research reports that “some cities are effectively offering cash-flow positive investments after interest expenses”:
With lending rates on the long term decline in Australia and (up until recently) property prices stagnating in recent years, what has become particularly interesting is the effect of the widening gap between lending rates and property rental yields. As average lending rates for home-buyers continue to decrease following on from multiple rate cuts, the gap between these lending rates and rental yields has continued to grow, literally to the point where some cities are effectively offering cash-flow positive investments after interest expenses. But as mentioned in previous weeks, while tempting, cash-flow property investments maybe offering such good yields for a very good reason.
