49ers rookie Jarryd Hayne reaping Sydney rental yield

NFL San Francisco 49ers rookie Jarryd Hayne, currently chasing his American dream, has a property investment portfolio back home in Sydney.

The priciest is a terrace in Darlinghurst that cost $1.58 million in 2013.

He recently rented it out with a $1,100 weekly asking rent through the Our Estates agency. 

What caught my attention was prior attempts to lease the West Avenue property at $1,700 a week.

There was a simple reason for the sharp rental difference - Hayne had bought it fully furnished and until recently had continued its short term rental setup.

Only trouble was the $1,700 short term tenants were few and far between - and it needed higher attendance to maintenance than the typical six or 12 month rental agreement.

His gross investment rental return now equates to around 3.6% - which sits between the median yield range of Sydney houses and apartments. 

Gross rental yields are trending lower, according to the CoreLogic RP Data, with Sydney's gross rental yield currently at 3.1% for houses and apartments at 4.1%.

CoreLogic's head of research Tim Lawless noted Sydney rents had increased by around 2.5% over the past year while values have climbed 17.6 per cent higher.

"It is easy to see how yields are getting squashed," Tim Lawless said.

Investors seeking yields will be likewise challenged if they head to other capital cities, as the Melbourne house yield sits even lower at 3% and at 4.1% for apartments.

Risky Darwin ranks as the highest capital on offer at 5.5% yield for houses and for units. National gross rental yields sitting at 7.8% in 1996 are now at a low of 3.5% for houses. 

It is not to say rents aren't constantly rising across Sydney.

Onthehouse calculates house rental growth in Sydney has averaged 4.75% over the past 25 years, putting the typical rental income for a Sydney house at $680 a week and $560 for an apartment. It is $400 outside of Sydney for NSW houses and $345 for NSW units, both reflecting around 5% gross yields.

The REINSW’s latest vacancy rate sits at 1.9% with population growth helping to fill vacant Sydney homes and potentially greater upwards pressure on rents. 

This is especially likely in those suburbs where newly constructed dwelling supply is in short supply. 

The inner-city had Sydney’s highest rate at 2.1% as plenty of newly constructed apartments are completed.

The middle-city sits at 1.7% and the outer-city fell at 1.6%. 

"The low yield scenario has largely been overlooked by investors who appear to be more focused on chasing future anticipated capital gains rather than aiming for cash flow," Lawless noted this week.

After such strong recent price growth there must inevitably come a pause, possibly lengthy.

I'm thinking after three years with around 15% annual price growth, that the investment focus on bricks and mortar ought sensibly shift to being a bit more about the yield.

It is though a rare occurrence for weekly rents to outpace dwelling values for growth as Tim Lawless says since 1996 there have been only two periods - around 2008 and 2011.

I don't see capital city yields returning to the highs of the 1990’s, but is reasonable to presume upcoming improvements in yields. 

The emergence of the more professional longterm SMSFs investors and their retirement income purpose might help shift the focus towards the rental side of the investment.

Then what would be terrific was if it also triggers a shift to long tenure European-style rental agreements. Short term rentals aren't the best foundation for improving anyone's housing situation.  

This article was first published in the Saturday Daily Telegraph.