Melbourne rental yields drop while median prices rise

Over the last 5 years, yields have dropped by 0.42%, from 3.06% in 2012 to 2.64% in 2017, according to Secret Agent’s latest bulletin.

“During this period, median house prices have increased by 38% (9% p.a.), compared to only an 11.8% increase in weekly rents (2.88% p.a.).

“On average, median weekly rents are between $500 and $700 for most suburbs.

“Sale prices tend to fluctuate significantly according to suburb.

“Suburbs with lower median prices tend to have higher yields, as weekly rent is mostly consistent across all regions,” the bulletin stated.

Secret Agent stated that high and low yields are not concentrated in any particular region of inner Melbourne.

“Collingwood, Cremorne and West Melbourne had the highest median yields in 2016/17 at 3.69%, 3.32% and 3.26%, respectively.

“Median prices were well below the $1 million mark.

“Burnley, East Melbourne and Alphington had the lowest median yields at 1.35%, 2.07% and 2.31%, respectively.

“Median prices were all above $1.3million.

“Sale price is strongly, negatively correlated with yield (-47%),” the bulletin commented.

Yield is more dependent on purchase price rather than rental income according to Secret Agent.

“Yields are even lower for larger properties, as sale price increases faster than median rent.

“In 2017, 2, 3 and 4 bedroom homes can expect to yield 2.72%, 2.61% and 2.52%, respectively.

“All three types have had the lowest yields since 2012.

Investors paying high prices for properties are even more reliant on capital growth to increase their returns,” the bulletin stated.

A three bedroom house at 5A Wilson Street, Moonee Ponds (above) is available for rent from $575 per week.

Similarly a two bedroom apartment at 2502/285 La Trobe Street, Melbourne is available for rent from $530 per week.