Rental yield is the annual return generated by a rental property as a percentage of its value. It is one of the primary measures used by property investors to assess whether a property generates sufficient income relative to its cost. There are two key measures: gross rental yield and net rental yield.
Gross Rental Yield
Gross rental yield is the simplest calculation — annual rent divided by the property purchase price, expressed as a percentage.
$$\text{Gross Rental Yield} = \frac{\text{Annual Rent}}{\text{Property Value}} \times 100$$
Example:
- Weekly rent: $550
- Annual rent: $550 × 52 = $28,600
- Property value: $700,000
- Gross yield: $28,600 ÷ $700,000 × 100 = 4.09%
Gross yield is quick to calculate and commonly used for comparing properties — but it ignores all the costs of owning and managing the property.
Net Rental Yield
Net rental yield deducts all the costs of owning the property from the rental income before calculating the yield.
$$\text{Net Rental Yield} = \frac{\text{Annual Rent} - \text{Annual Costs}}{\text{Property Value + Purchase Costs}} \times 100$$
Example:
- Annual rent: $28,600
- Annual costs: council rates $2,000 + property management $2,860 + insurance $1,200 + maintenance $1,500 + water rates $800 = $8,360
- Property value: $700,000 + stamp duty $30,000 + other purchase costs $5,000 = $735,000
- Net yield: ($28,600 − $8,360) ÷ $735,000 × 100 = 2.76%
Net yield gives a much more realistic picture of the actual income return on a property investment.
Gross vs Net Yield — Summary
| Metric | Includes purchase costs | Includes ongoing costs | Complexity |
|---|---|---|---|
| Gross yield | No | No | Simple |
| Net yield | Often yes | Yes | More accurate |
What Is a Good Rental Yield in Australia?
Rental yields vary significantly by city, suburb, and property type. As a general guide for Australian residential property in recent years:
| City / Region | Typical gross yield range |
|---|---|
| Sydney | 2.5–3.5% |
| Melbourne | 2.5–3.5% |
| Brisbane | 3.5–5.0% |
| Adelaide | 3.5–5.0% |
| Perth | 4.0–5.5% |
| Hobart | 3.5–5.0% |
| Regional Australia | 4.0–7.0% |
Higher-priced capital city properties tend to have lower yields — the purchase price grows faster than rents. Regional and lower-priced markets typically offer higher yields but potentially lower long-term capital growth.
Yield data changes with market conditions. Always verify current rental income and comparable sales for the specific property.
Rental Yield vs Capital Growth
A fundamental tension exists in Australian property:
- High yield, lower growth: Regional areas, outer suburbs, units — rents are high relative to purchase price but long-term capital appreciation is typically lower
- Low yield, higher growth: Inner-city premium areas — capital growth has historically been stronger but rental income rarely covers holding costs
Investors must decide which matters most for their strategy. See Capital Growth vs Rental Yield.
Vacancy Rate — An Important Yield Assumption
Gross and net yield calculations assume 100% occupancy. In reality, a property may have vacancy periods between tenants. A 4% annual vacancy (approximately 2 weeks) reduces effective gross yield proportionally. High-vacancy markets reduce real-world yield below the calculated figure.
Check vacancy rates for your target suburb via SQM Research (sqmresearch.com.au).
Rental Yield and Negative Gearing
If a property’s net yield falls below the mortgage interest rate, it is negatively geared — the investment costs more to hold than it earns. Many Australian property investors deliberately accept negative gearing in exchange for capital growth prospects and the associated tax deduction. See Negative Gearing Explained.
Related Articles
- Capital Growth vs Rental Yield
- Negative Gearing Explained
- Positive Gearing Explained
- Investment Property Tax Deductions
- Property Investing hub
Frequently Asked Questions
What is a good gross rental yield in Australia? In 2026, a gross yield above 4% is generally considered respectable for residential property in Australia. Sydney and Melbourne typically see gross yields of 2.5–3.5% for houses in established suburbs. Regional Queensland and Western Australia have seen gross yields of 5%+ in recent years. “Good” depends on your investment strategy — if you’re banking on capital growth, a lower yield may be acceptable.
How do I calculate rental yield on a unit vs a house? The formula is the same — annual rent divided by purchase price. Units often yield more than houses in the same area because their purchase prices are lower while rents are not proportionally lower. However, units may face higher body corporate fees and more competition, affecting net yields.
Does stamp duty count in yield calculations? Stamp duty should be included in your cost base when calculating net yield, as it is a real cost of acquiring the property that must be recovered through returns. Including it reduces the apparent net yield.
This article provides general financial information only. For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.