Rental rates for properties in Sydney and Melbourne have fallen in the past 12 months, and are expected to fall further, according to analytics firm RP Data.
While the value of capital city properties has surged to pre-GFC levels over winter, rental yields across capital cities have fallen, hurting investors.
The value of dwellings grew by a national average of 4.2 per cent, but the typical gross yield on rental properties slumped from 4.1 per cent to 3.7 per cent.
RP Data research director Tim Lawless said that rental prices in Sydney would continue to fall, matching Melbourne’s low yield of 3.2 per cent.
“With yields so low in the cities where values are seeing the largest capital gains, it is clear that investors remain very much focussed on value growth rather than yield,” Mr Lawless said.
“Given the current rate of value growth and moderate rental growth, it won’t be long before Sydney yields have moved below those of Melbourne.”