Rental Yield

Plain-English definition. Rental yield is the annual rental income from an investment property expressed as a percentage of the property's value, used as the standard income-return metric. It can be quoted gross (before expenses) or net (after).

How it works in Australia. CoreLogic, Domain, PropTrack and SQM Research publish rental yields by suburb, dwelling type and city. Yields and capital growth tend to be inversely correlated across Australian markets: Sydney has historically had the lowest gross yields (2.5–3.5%) and the highest long-run capital growth; Perth and Hobart have higher yields but more cyclical growth. RBA research has consistently shown that total return on Australian residential property over multi-decade periods runs roughly 8–10% nominal, of which 3–4% is income and 5–7% is capital.

Concrete example. A $620,000 Brisbane unit rents at $570/week. Gross yield: 4.78%. Net yield after $13,000 of expenses: 2.68%. A comparable $1,200,000 Sydney house renting at $850/week shows gross yield of just 3.68% and net yield of around 1.8% — Sydney investors are clearly paying for capital growth, not income.

Common confusion. Investors fixate on yield and ignore capital growth — or vice versa. Total return matters: a 3% yield + 6% growth (Sydney) often beats a 5.5% yield + 2% growth (regional Tasmania) over a long hold, especially after the 50% CGT discount. Always evaluate yield alongside expected growth, vacancy risk, and the costs of holding.