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Australia's property market is not currently seeing the level of rental appreciation you'd expect to see with vacancy rates currently at such low levels, according RP Data's head of research.
Tim Lawless told Residential Property Manager that with rents only just keeping pace with inflation, the market shouldn't really expect yields to show any sort of upward momentum until the housing market slows down.
“When you look at the growth in rent last year, it was only about 2.5 per cent across the capital cities,” said Mr Lawless.
“At the same time, [property] values have risen by more than 10 per cent, so clearly we’re seeing dwelling values outpacing rental growth quite substantially,” he added.
Mr Lawless believes the by-product of this is rental yields "now being compressed", particularly in the cities that have experienced strong growth, such as Sydney and Melbourne.
“Rental yields are looking pretty unhealthy in those cities where rental growth has been outpaced by values,” he said.
On a more positive note, Mr Lawless said Brisbane rental returns are looking a little rosier.
“In Brisbane, we are still seeing rents being outpaced by value growth but by nowhere near the same margins. Yields are still looking pretty healthy in Brisbane, compared to Sydney and Melbourne
“Broadly speaking, we’re not really seeing the level of rental appreciation you’d expect to see when vacancy rates are so low,” he added.
