Which cities deliver lowest yields to Australia property investors?

If you are property investors, can you guess which city delivers lowest rental yields?

According to the Australian Property Monitors report, houses and units in Australia’s two largest capital cities, Sydney and Melbourne, are offering landlords comparatively low returns as rental markets across the country rebalance.

The Australian Property Monitor’s Rental Price Series Quarterly Report shows that even though Sydney remains the most expensive capital city for tenants, this is not translating into growing returns for investors.

“Rental yields for houses in Sydney continue to weaken as a result of strong price rises and a surge in investor activity,” Australian Property Monitors senior economist Dr Andrew Wilson said.

“This year, we can expect to see rising supply and moderating demand put further downward pressure on house rental growth in the city.”

Mr Wilson said the unit market in Melbourne continued to weaken.

“After an extended period of negative growth, house rents in Melbourne are on the climb again. However, unit rents are still in decline due to an increased supply of inner-city apartments,” he said.

The report found Brisbane and Perth are providing investors with the highest yields for houses and units.

Brisbane, Hobart, Darwin and Adelaide all saw growth in both house and unit rents over the December quarter.

Perth house rents were flat while unit rents fell sharply by 4.8 per cent.

Canberra saw a 2.5 per cent increase in unit rents, while house rents decreased by 1.1 per cent over the quarter.