I used to have a 'rule of thumb' for direct property investing: If you drop three zeros off the purchase price of an IP then that's what you'd like in rent a week eg purchase at $300k, rent at $300 per week. That way, direct rental yield is 5.2%. Do such properties still exist (they certainly don't in WA!) - or are they ever likely to? Has investing in property changed forever?
With the ultra-tight rental market in Adelaide, we are starting to see yields creep up again, I'm sure you can find yields close to this in the outer suburbs right now. However, it wasn't that long ago (5 years) that we were buying houses on 7%+ yields within 10km of the CBD, so 5% seems like a poor return for the areas you have to buy in. If we get a couple of rate rises before the end of the year, I suspect we'll see a sharp decline in most real estate markets, which may drive yields quite a bit higher ... that's when I start to get interested !!
The old 5% yield becomes naturally harder to attain as the purchase price increases, however it's certainly not unachievable and particularly in the sub $500K market, in Sydney at least. I've been looking for clients in this range recently and rents are likely to be around the 4-5% gy as rental demand is strong- particularly for units with parking closer to the CBD. If two rate rises do occur, there are still some suburbs that I don't think will be as affected- they simply seem to be recession-proof and demand is just constantly there- especially in the semi/housing quiet street market.
