What suburbs have the best rental yields in Australia?

The formula: Annual rental income ÷ The value of the property X 100 = gross rental yield.

Eagle-eyed readers will notice the word ‘gross’. Gross rental yield is useful to determine a property’s general investment potential, but it doesn’t give you a realistic idea of your outgoings. To work out net rental yield, factor in your expenses.

These expenses may include:

Note that some of these expenses are tax deductible to property owners who rent out their houses/units, but it’s still best to include them in your calculations.

Net rental yield example:

The amended formula: (Annual rental income - costs of owning your property) ÷ The value of the property X 100 = net rental yield.

Why is rental yield important for property investors?

The best rental yields mean more than just a steady income. This percentage rates the efficiency of an investment property in generating returns. It’s a vital metric that affects your investment decision-making. Property investment is a potentially life-changing commitment. Looking at suburb rental yields as part of your research process is just one of many factors you’ll need to consider before taking the plunge. Before we spotlight some suburbs, we will discuss the underlying factors that typically lead to high rental yields.

How does a suburb get a strong rental yield?

Any particular suburb can attain high rental yields through a combination of several interconnected factors. For perspective, in Australia, a net rental yield of ~4.5% or higher is considered ‘good’. So, I consider anything above that benchmark as ‘strong’.

Potential investors should look out for these characteristics when identifying suburbs for investment opportunities.

However, the golden ticket for wealth-building is suburbs that offer high rental yields and potential for capital growth. High rental yields aren’t necessarily the best rental yields, depending on your investment strategies (more about that later).

What are the best rental yield suburbs in Australia?

Let’s go through the states one by one to highlight Australian suburbs with the highest gross rental yields. Identifying properties in these high-yield suburbs should offer investors a fantastic opportunity to establish a steady cash flow. Note that, for the purposes of these stats, I’m combining house and unit rental yields. However, digging into the granular details will reveal some interesting differences between the two in some suburbs. Our source for this data is Smart Property Investment.

1. New South Wales

New South Wales, particularly in regions such as Broken Hill and Lismore, has seen consistently high rental yields, benefiting from a mix of urban expansion and regional appeal. These areas often attract a diverse range of tenants, from students to professionals, ensuring steady demand and strong rental returns over time. You won’t find central Sydney suburbs here as they typically return around 2% rental yields.

2. Victoria

Victoria showcases a pattern where both urban centres and remote locations offer attractive rental yields. The state's vibrant cultural scene and robust educational institutions continue to drive rental demand, particularly in inner-city suburbs.

3. Queensland

Queensland has experienced some of the highest rental yields in Australia, particularly in mining towns like Bucasia and Middlemount. High demand for short-term housing is pushing rental yields to impressive highs.

4. Australian Capital Territory

In the ACT, suburbs such as Red Hill and Hawker demonstrate strong rental yields, supported by a stable demand linked to public sector employment near Australia’s capital city, Canberra. Due to its governmental and administrative roles, this region consistently offers lower vacancy rates and reliable tenant demand.

5. South Australia

South Australia maintains high rental yields thanks to industrial activity and limited housing supply. These factors make it an attractive region for investors looking for stable income-producing properties.

6. Western Australia

Western Australia’s rental yields have been highly volatile but potentially lucrative. This volatility reflects the boom-and-bust nature of the resources sector’s prevalence in WA markets.

7. Northern Territory

The Northern Territory shows strong rental yields in areas like Darwin and Karama. Key industries such as mining and tourism, combined with limited housing availability, are driving these percentages.

8. Tasmania

Tasmania has seen a gradual increase in rental yields thanks to its growing popularity as a lifestyle destination. The appeal of affordable property prices in beautiful scenic areas attracts long-term residents and holiday renters alike.

Considerations for investors

As alluded to earlier, depending on your investor strategy, a high rental yield does not automatically make for a sound investment. There are plenty of other factors to consider. ● Property value growth potential: If your property value increases over time, this logically increases the overall return on investment (you gain equity or turn a profit if you decide to sell). You get substantial capital gains on top of your rental income. If an area has substantially high rental yields but offers little growth potential, you may want to think twice about investing. ● Vacancy rates: To earn rental income, you need tenants. Low vacancy rates suggest sufficient demand in the rental market you can rely on. High vacancy rates in any given suburb can lead to reduced income and might require lower rental prices to attract tenants. ● Long-term investment strategy: Consider your long-term property portfolio and your overarching goals. Is immediate cash flow a priority? Are you looking to protect against market fluctuations? Are you hoping to expand your portfolio further? Assessing your long-term strategy will dictate what’s best for you at any given moment in your property investment journey. Speaking to a professional property specialist will help you determine your aims. In addition to these three critical factors, you’ll want to investigate the broader direction the suburb is taking. Are there local amenities for tenants? Is the local infrastructure sufficient to support growth? Is future development on the horizon for the area? Understanding the area will help build a better picture of the whole package for your prospective investment property. Speaking to property specialists about this can help you make well-informed decisions about your financial future.

Tips for finding high-yielding properties

So, what should you do if you’re looking to find high-yielding investment properties in Australia? Here’s what I would do:

1. Investigate

Depending on your preferences in terms of state, thoroughly research the highest-yielding suburbs in the tables above.

2. Go regional

Opt for regional areas—they tend to offer higher yields than properties within capital cities (generally). However, the downside is that they typically offer less capital growth potential (though that, also, is not necessarily always the case).

3. Visit government websites

Head online to help you understand local markets and other relevant elements, such as your tax implications:

4. Consult an expert

My main piece of advice is to consult a property management specialist to unpack all of the elements. They can help you:

Having an expert on the side to offer personalised advice is critical when your capital and financial future are at stake.

Summing up

Buying an investment property in Australia is a thrilling commitment. With careful research and sound judgment, you can find yourself well on your way to financial freedom. Understanding the significance of rental yields can help you secure better returns. Selecting the right suburb based on the best rental yields and several other factors gives you the best chance of an astute investment, but I’d advise against trusting instincts or going alone. Feel free to connect with me or explore more about DiJones and our services for advice and assistance. We’re here to help you navigate the complex property market and maximise your investment potential; there’s no blanket approach to property investment, so it’s best to seek personalised, professional advice.