Rental yields on the rise and a better option than cash and bonds: Janusz Hooker

Rental yields have been increasing across most of Australia over the past 12 months and are better option than holding cash or government bonds, according to Janusz Hooker, executive chairman of real estate group LJ Hooker. 

Rising yields, he says, are being driven by softening property prices and increasing rents due to relatively low vacancy rates nationwide. 

“Given the forecast supply of rental stock and forecast demand for rental stock, rents look set to continue their five-year historical average growth of 5.8% per annum for apartments and 5.4% per annum for homes,” he says. 

“At present average gross yields for apartments in Australia are 5.2% (around 4.2% net of expenses) and for homes 4.5% (around 3.5% net of expenses). 

“If you look at real estate as a long-term asset class to hold, these yields are becoming increasingly attractive compared to cash and government bonds – not to mention the appreciation of the property asset,” Hooker says. 

“Typically more affordable housing has a higher yield. 

“Also property yields are often higher outside of the major metropolitan areas.” 

Hooker says the highest yields at present in Australia are in the mining boom towns in the Pilbara and central Queensland, where double-digit yields are achievable on rental properties.