Australian Rental Yield Benchmarks: Why Units Out-Yield Houses, State by State

Ask what makes a good rental yield in Australia and you’ll get a confident answer — “5%, easy” — usually from someone selling something. Pull the actual figures and two things jump out: the real yields are lower than the pitch, and they’re gross — before a single cost comes out.

Heyward measured the current gross rental yield — annual rent over price — for houses and units across 30 of Australia’s most-targeted investor markets. The headline benchmark: about 3.7% for houses and 5.3% for units. Not the 5–6% the brochures imply, and that’s the number before strata, rates, insurance, management and vacancy take their cut.

Here are the benchmarks by state and property type, why units almost always out-yield houses, and the assumption about yield and growth that the data quietly demolishes. (These are our own measurements across a deliberate cross-section of markets — gross yields, current snapshot, not a government index. The growth figures alongside come from our 12-year growth study.)

“Normal” for an established house sits between about 3% in the expensive capitals and 4.5–5.6% in the cheaper states and the Territory. Units run higher and tighter — mostly 4.5% to 5.9%. New South Wales — read Sydney — anchors the bottom on houses at 2.93%, the lowest in the country.

One caveat to read the table with: CBD house data is thin, because central postcodes barely transact houses. Brisbane City’s 7.58% house figure rests on a handful of sales and is excluded from the state average above; Sydney’s CBD has no house data at all (it’s a unit market). Where a number rests on few sales, treat it as a hint, not a fact — the same discipline that applies to reading any suburb’s numbers.

Units out-yielded houses in 26 of the 29 markets with data for both — and in the expensive ones, it isn’t close.

The reason is structural. A house price is carried by its land; the rent is carried by the dwelling. Land value inflates the price without inflating the rent in step, so the rent-to-price ratio — the yield — falls. The pattern is sharpest exactly where land is dearest:

• Strathfield (NSW): house 1.66% vs unit 5.20% — a blue-chip house here is a land bet that happens to come with a tenant, not an income asset.
• Mosman (NSW): house 2.27% vs unit 3.54%.
• Richmond (VIC): house 3.37% vs unit 5.95%.
• Melbourne CBD: house 4.59% vs unit 7.51% — the oversupplied inner-city apartment market, where flat prices and steady rents leave a high gross yield behind.

The flip side is growth, and it runs the other way. Land is what appreciates, so houses generally grow faster while units yield more — the unit markets that posted the highest yields (Melbourne, Richmond) were the same ones that grew the slowest. A unit buys you income; a house buys you growth. Pick the one that matches the job the property is meant to do — and don’t expect a single property to do both.

“You trade yield for growth” is one of property’s most repeated rules. Across this window, for houses, it was backwards.

The states with the highest house yields also had the highest growth. Tasmania paid 4.56% and grew 8.1%; Queensland paid 4.24% and grew 6.7%. The state with the lowest house yield — New South Wales at 2.93% — also had near-the-slowest growth at 3.7%. Sydney didn’t trade yield for growth; it delivered the worst of both.

As a rough read on total return, add the two together (gross yield plus price growth, before costs, tax and leverage):

NSW house:  2.93% yield + 3.74% growth ≈  6.7% / year
TAS house:  4.56% yield + 8.07% growth ≈ 12.6% / year

The cheaper market roughly doubled the total return of the blue-chip one, on both counts at once. That isn’t a law — it’s our sample over one particular decade, and the affordability catch-up that drove cheaper-state prices also kept their yields up. But it’s enough to retire the lazy version of the rule: a low yield does not guarantee a growth payoff in exchange.

The one place the old instinct held was the Northern Territory: the highest yields in the sample (house 5.6%, unit 7.7%) sitting on top of falling values. That’s the real signal in a sky-high yield — not a bargain, but a market the income has to compensate you for holding.

Every number above is gross — annual rent over price. It’s the figure on the brochure, and it’s not the figure that reaches your account. Net yield is what’s left after the property pays its own bills:

$600,000 unit, 5% gross yield = $30,000 rent/year

Less, per year:
  Strata levies           ~$5,000
  Council rates           ~$1,800
  Insurance (+ landlord)  ~$1,200
  Management (7% of rent)  ~$2,100
  Maintenance + vacancy   ~$1,900
                         ──────────
  Total holding costs     ~$12,000
  Net rent                ~$18,000  →  3.0% net

A 5% gross yield became 3% net — and that’s before a dollar of mortgage interest. Units take the heavier hit because of strata, which is one reason their headline yield advantage over houses narrows once the costs come out. When you compare two properties, compare net to net; a gross-versus-gross comparison flatters whichever one has the bigger hidden costs.

To run it yourself: gross yield is just annual rent ÷ price (a $520/week unit at $600,000 is 520 × 52 ÷ 600,000 = 4.5%). Then subtract the real costs above to get net, and remember the numbers move — these are a current snapshot, and a single market’s yield drifts as rents and prices pull apart.