Rental returns on apartments in Sydney are low, at 2.8% to 3.7%

Residential Valuation Specialist | September 28, 2019

Last Updated: Sept. 28, 2019
Melbourne - Apartments COST (US$) YIELD (p.a.)
TO BUY MONTHLY RENT
Balwin      
1 BR n.a. 1,149 n.a.
2 BR 410,720 1,267 3.70%
3 BR 850,000 1,768 2.50%
Brighton
1 BR 374,000 1,179 3.78%
2 BR 612,000 1,621 3.18%
3 BR 975,800 2,343 2.88%
Cambwewell
1 BR 158,100 1,149 8.72%
2 BR 467,840 1,355 3.48%
3 BR 848,300 1,909 2.70%
Canterbury
1 BR n.a. n.a. n.a.
2 BR n.a. 1,297 n.a.
3 BR 1,074,400 2,322 2.59%
Caulfield North
1 BR 272,000 1,031 4.55%
2 BR 410,040 1,355 3.97%
3 BR 604,520 1,915 3.80%
Hawthorn
1 BR 258,400 1,061 4.93%
2 BR 391,000 1,355 4.16%
3 BR 738,480 2,018 3.28%
Malvern
1 BR 265,200 1,105 5.00%
2 BR 414,800 1,355 3.92%
3 BR 811,240 2,057 3.04%
South Yarra
1 BR 268,600 1,179 5.27%
2 BR 418,200 1,621 4.65%
3 BR 690,200 2,357 4.10%
Surrey Hills
1 BR n.a. 1,120 n.a.
2 BR 487,220 1,282 3.16%
3 BR 811,920 1,842 2.72%
Toorak
1 BR 278,800 1,031 4.44%
2 BR 518,500 1,444 3.34%
3 BR 1,115,200 2,136 2.30%
PERTH APARTMENTS
Cottesloe
1 BR 288,490 1,031 4.29%
2 BR 479,400 1,326 3.32%
3 BR 1,091,400 1,915 2.11%
Nedlands
1 BR n.a. 869 n.a.
2 BR 374,000 1,061 3.40%
3 BR n.a. 1,326 n.a.
Crawley
1 BR 216,920 863 4.78%
2 BR n.a. 1,105 n.a.
3 BR 680,000 1,621 2.86%
Claremont
1 BR n.a. 1,061 n.a.
2 BR 333,200 1,179 4.24%
3 BR 584,800 1,680 3.45%
Applecross
1 BR n.a. 766 n.a.
2 BR 352,580 943 3.21%
3 BR 564,400 1,385 2.94%
SYDNEY APARTMENTS
Bellevue Hill
1 BR 453,560 1,532 4.05%
2 BR 646,000 1,915 3.56%
3 BR 1,428,000 2,947 2.48%
Darling Point
1 BR n.a. 1,901 n.a.
2 BR 1,054,000 2,505 2.85%
3 BR 2,074,000 4,125 2.39%
Double Bay
1 BR n.a. 1,650 n.a.
2 BR 714,000 2,092 3.52%
3 BR 1,985,600 3,241 1.96%
Mc Mahons Point
1 BR 544,000 1,547 3.41%
2 BR 963,900 2,063 2.57%
3 BR n.a. 3,536 n.a.
Kirribilli
1 BR 586,500 1,473 3.01%
2 BR 1,173,000 2,063 2.11%
3 BR n.a. 3,094 n.a.
Paddington
1 BR 433,500 1,429 3.96%
2 BR 623,900 2,210 4.25%
3 BR n.a. 3,020 n.a.
Point Piper
2 BR n.a. 2,617 n.a.
3 BR n.a. 3,904 n.a.
Potts Point
1 BR 408,000 1,606 4.72%
2 BR 710,600 2,416 4.08%
3 BR n.a. 4,046 n.a.
Pyrmont
1 BR 418,200 1,680 4.82%
2 BR 680,000 2,278 4.02%
3 BR 1,819,000 3,610 2.38%
Rose Bay
1 BR n.a. 1,532 n.a.
2 BR 691,900 1,915 3.32%
3 BR 1,428,000 3,241 2.72%
Vaucluse
1 BR n.a. 1,621 n.a.
2 BR 642,600 2,004 3.74%
3 BR n.a. 2,505 n.a.
All yields are gross - i.e., before taxes, repair costs, ground rents, estate agents fees, and any other costs. Net yields (what you´ll really earn) are typically around 1.5% to 2% lower.
Source: www.realestate.com.au Definitions: Data FAQ See also: Update Schedule

Our Sydney apartment survey is based on the number of bedrooms, because so few advertisements cite square metre measurements.

As we would expect, there are huge difference in the cost of apartments in Sydney depending on area, from relatively inexpensive Vaucluse, to high-priced darling Point and Potts Point. What doesn´t differ much are the now low gross rental yields available on Sydney properties (the rental yield is the per cent return on the purchase cost of a property). This will not make landlords happy.

It is rare in Sydney to be able to earn more than 3.7%, and most apartments return less. Bear in mind that usually costs of various kinds will absorb at least 2% of those returns, so that net returns will be a lot lower than the gross figures.

Small apartments earn significantly higher rental returns than big apartments. This is particularly true in the more expensive districts, and if you are looking for yields the table will tell you that the exception to our generally low return figures are 1 bedroom apartments in Potts Point, which can earn gross rental yields of 4.9%.

Surprising, but worth investigating.

Comments

Alex Armada | November 30, 2013

These figures are unrealistic because:
- Inner city apartment average price is about $500,000 . Add 10% buying-selling fees and taxes for your actual cost.
- Such property rents for $1,800-2,200 per month. Assume 50 week rent annually. Most units are rented by singles and students 2-3 people sharing one bedroom and moving around almost every year or two. Allocate some funds for renovation every 3-4 years unless you're lucky to have a single professional long term tenant.
- Annual strata management, insurance, council and water rates will be about $7,000-9,000.
- 6-7% real estate agency fees deducted from your rent
- Plus maintenance... Simplest repair, handyman will charge you $150 for changing the light bulb in Sydney

So, you are looking at a poor 2.5-3% return. Your only chances is capital gain. With average house prices about 9-10 times the average income, all time low only 5% first home buyer rate, interest rates at 30 year low (slowing economy?), AUD at 30 year high, the market is stretched like a balloon full of water. The government is also removing first home buyer incentives in 2014. Your chances are not so great in this saturated market. Take the risk, and cross your fingers.

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