CoreLogic has released rental data for July, which shows that rental growth nationally is running at its fastest pace since 2008, up 7.7% year-on-year.
However, rental growth is two-speed, with the smaller capitals generally experiencing faster growth than the bigger capitals, and detached houses experiencing much faster growth than apartments:
With dwelling prices growing even faster, the rental yield nationally has compressed to a record low 3.4%, down from 4.1% two years ago:
As you can see, the average gross rental yield in Sydney was only 2.5% in July and just 2.8% in Melbourne – way below average.
Nevertheless, with mortgage interest rates so low, neutral or positively gearing opportunities are still available across many markets outside of Sydney and Melbourne. This, in turn, should continue to see investment activity lift, according to CoreLogic:
“Considering mortgage rates on new investment loans are averaging around 2.8%, gross rental yields outside of Sydney and Melbourne are likely to be providing opportunities for positive cash flow investment opportunities. Considering yields outside of Sydney and Melbourne are high relative to mortgage rates and housing values are expected to rise further, we are likely to see investment activity continue to lift.”
Thus, we are likely to see the driver of the property boom continue to shift from first home buyers to investors.