The news is awash with stories of how real estate prices are falling and rent is rising. But if you are looking for a property investment with a good yield this may be your time.
Here is a few of the recent news stories.
ABC – Property downturn spreads to 93pc of suburbs in Australia’s capital cities
The Guardian – Critics of Labor’s tax changes claim rents could climb by up to 30%
AFR – Slump in housing prices now entrenched across nation’s capitals
SMH – Big four banks expect property market to feel pain through 2027
CBA – Housing correction deepens: CommBank economists
It is clearly the reporting season in the property market and the direction of the rental market is very different to capital values across the country.
If values are falling and rents are rising that means yields or returns are getting more and more attractive. Not surprisingly investors are starting to take notice and are cautiously re-enter the market.
In April 2025 we reported on a list of specific deals that showed gross returns of between 7% – 9%.
At that time, those returns were unicorns. Now they are commonplace.
You don’t need to hunt around for one off deals any more to see how yields have improved. Just reviewing the median rental price for apartments as a percentage of the median unit price in a selection of inner city suburbs the median yield is looking attractive.
Melbourne Apartment Market Snapshot
Median rents, unit values, annual changes and indicative gross yield.
| Suburb | Median Rent | Rent Change (12m) | Median Unit Value | Value Change (12m) | Indicative Gross Yield |
|---|---|---|---|---|---|
| Abbotsford | $600/wk | ▲ 7.1% | $518,250 | ▼ 0.2% | 6.0% |
| Carlton | $495/wk | ▲ 4.2% | $328,000 | ▼ 4.1% | 7.8% |
| Docklands | $700/wk | ▲ 6.1% | $583,000 | ▼ 2.8% | 6.2% |
| Fitzroy | $680/wk | ▲ 4.6% | $795,000 | ▲ 3.6% | 4.4% |
| Melbourne CBD | $670/wk | ▲ 3.1% | $460,000 | ▲ 1.1% | 7.6% |
| North Melbourne | $590/wk | ▲ 7.3% | $520,000 | ▲ 8.3% | 5.9% |
| Port Melbourne | $700/wk | ▲ 3.7% | $720,000 | ▲ 4.0% | 5.1% |
| Prahran | $560/wk | ▲ 1.8% | $475,000 | ▼ 6.4% | 6.1% |
| Richmond | $600/wk | ▲ 1.7% | $570,000 | ▲ 5.6% | 5.5% |
| South Melbourne | $660/wk | ▲ 3.1% | $602,500 | ▲ 0.4% | 5.7% |
| South Yarra | $625/wk | ▲ 4.2% | $541,000 | ▼ 5.3% | 6.0% |
| Southbank | $700/wk | ▲ 2.9% | $540,000 | ▼ 3.6% | 6.7% |
| St Kilda | $550/wk | ▲ 4.8% | $525,000 | ▲ 2.4% | 5.4% |
| St Kilda Road* | $670/wk | ▲ 3.1% | $461,900 | ▲ 1.5% | 7.5% |
* St Kilda Road figures represent the St Kilda Road apartment market.
From this analysis the yields start at 4.5% in Fitzroy and go up to 7.6% in the St Kilda Road precinct. That is the annual gross return before any costs. Take off about 1.5% to 2% for costs. Therefore the net yield will be over 5% in several suburbs.
If we do the same analysis for just 1 bedroom apartments the yields get to over 8% in Melbourne’s CBD, St Kilda Road, Southbank and Carlton.
Current investor sentiment has been battered by higher interest rates, increased land tax, extra compliance and owners corporation fees plus changes to CGT and negative gearing. These have all dimmed investor’s view of the market.
But while investors have been heading for the exit, the numbers have been turning around.
When we do the same analysis for houses the yields range from 2.4% in South Yarra to 3.5% in Fitzroy. Apartments out perform houses for annual return by some margin.
Houses have always been the favourite for investors seeking longer term capital growth with the rent providing a smaller return. Now the 50% capital gains tax concession has been removed it diminishes the attraction of the capital gain component and puts the annual return of investment property into the spotlight.
The anecdotal outlook espoused by my commentators suggest values may have further to fall and rents will continue to rise. If this is right the impact on annual return when values drop and rents rise will be dramatic. To the point where we may see 9% or 10% yields for certain property in some suburbs.
If this happens expect to see investors pile back into the property investment market.
