Reviewing Australian rental yields, to September 2011

Figures to September 2011 from Australian Property Monitors show rents are up or stable in every capital city over the past year with the exception of Hobart where apartment rents are down six per cent.

This is good news, and quite positive relative to the troubles affecting many overseas markets and the equities markets.

Right now Australian property prices are stable in most markets and rents have kept rising generally. New mortgage applications now contain a large proportion of investors, the statistics are showing. Investors were 38% of all loan applications in September, for Australia’s largest mortgage aggregator, AFG.

Investors can generally achieve up to five to six per cent yield right now on alot of Australian property, which goes a long way to help cover a mortgage in the six to seven per cent interest rate range, which is where we are now, and rates are currently falling.

Here’s the breakdown by State, of the annual rental increases;

Sydney – houses 3.1 per cent, apartments 4.5 per cent
Melbourne – houses zero per cent, apartments zero per cent
Canberra – houses 3.3 per cent, apartments 4.9 per cent
Brisbane – houses 2.8 per cent, apartments 5.9 per cent
Perth – houses 2.7 per cent, apartments 5.7 per cent
Adelaide – houses zero per cent, apartments 1.9 per cent
Darwin – houses zero per cent, apartments 5.9 per cent
Hobart – houses 1.6 per cent, apartments minus six per cent.
*Source: Australian Property Monitors Year on Year Sept Qtr 2011

How do you increase the rental return on your property?

Two things will determine the rental return of your property – the demand in the marketplace and the appeal of the property itself. Right now, demand is high so there is a natural increase in rental property values. But if you want to increase the rent further, there are many small things you can do to add serious value.

When selling a property, your prospective buyer is unlikely to walk away because the kitchen doesn’t have a dishwasher or they don’t like the curtains because these are things they can immediately rectify after the purchase. Tenants don’t have the same options, so they’re more likely to walk away over small things.

Here are some ideas to help you demand a better rental value and therefore property rental return or yield.

1. Install built-ins – few people have freestanding wardrobes these days. If one of the bedrooms doesn’t have built-ins but has the space for them, put them in.
2. Install New window coverings – these can substantially improve the décor and add privacy. White shutters for example are very popular and can freshen up and modernise a property
3. Install a skylight – this is a quick and inexpensive way to bring more natural light into dark houses.
4. Install a dishwasher – tenants will pay more for a property with a dishwasher and you can depreciate it for tax purposes too.
5. Replace light fittings/switches/doorknobs – for a small outlay you can modernise the look of your property very easily.

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