Rental yield is the first number every property investor learns and the one most of them misunderstand. It looks simple — rent as a percentage of price — but the figure quoted on a listing (the gross yield) can be a third higher than what actually lands in your pocket. Here's how to calculate it properly, what counts as a good yield in 2026, and the typical yields across every Australian capital — so you can tell a genuine income earner from one that just looks like one.
What rental yield actually is
Rental yield is the annual rent a property earns, expressed as a percentage of its value. It measures a property's income return — how hard the rent works relative to what the place costs. That's a different question from capital growth, which is how much the property itself rises in value over time. Put them together and you get the only number that really matters: total return = rental yield + capital growth.
Gross vs net yield: the gap that catches people out
There are two yields, and the difference between them is where most investors get a nasty surprise.
Gross yield (what's always quoted)
Gross yield = (annual rent ÷ property value) × 100.
Say a property worth $650,000 rents for $550 a week. Annual rent is $550 × 52 = $28,600. Gross yield is $28,600 ÷ $650,000 × 100 = 4.4%. That's the figure you'll see on listings and in CoreLogic and Domain reports, because it needs only two public numbers: rent and price.
Net yield (what you actually keep)
Net yield = ((annual rent − annual expenses) ÷ property value) × 100.
Now subtract the costs of actually owning the thing — council and water rates, land tax where it applies, strata levies on a unit, landlord insurance, property management (around 6–8% of rent), maintenance (roughly 1–1.5% of value a year), and a vacancy allowance of a few weeks. On that same $650,000 property, say those costs total $9,000 a year. Net income is $28,600 − $9,000 = $19,600, and net yield is $19,600 ÷ $650,000 × 100 = 3.0%.
That's the lesson in one line: a 4.4% gross yield became a 3.0% net yield once real costs were in. Gross is what gets advertised because it's easy to calculate; net is what you live on. Always run the net number before you buy. (Note that net yield deliberately leaves out your mortgage interest — that's a financing cost, not a property cost, and it's handled separately in your gearing position.)
Average rental yields by city in 2026
These are gross yields for all dwellings combined, from Cotality (formerly CoreLogic) for early 2026. They're the cleanest, most-cited figures available — use them as your benchmark.
| City | Gross yield (all dwellings) | Median dwelling value |
|---|---|---|
| Sydney | 3.1% | ~$1,296,000 |
| Melbourne | 3.7% | ~$826,000 |
| Brisbane | 3.3% | ~$1,081,000 |
| Adelaide | 4.3% | ~$923,000 |
| Perth | 3.7% | ~$989,000 |
| Hobart | 4.3% | ~$729,000 |
| Darwin | 6.0% | ~$602,000 |
| Canberra | 4.0% | ~$903,000 |
| National | ~3.6% | ~$923,000 |
Two clear patterns. Sydney and Melbourne sit lowest — their high prices mathematically compress the yield, even though the dollar rents are the country's highest. Darwin leads by a distance at 6.0%, on the back of the lowest prices and the tightest vacancy rate in the country (around 0.4%). And as a rule, units out-yield houses by roughly 1 to 1.5 percentage points in every capital — they're cheaper to buy relative to the rent they earn (though strata fees claw some of that back on a net basis). Nationally that works out to about 3.0% for houses and 4.3% for units. Regional and mining towns sit higher again — it's not unusual to see 8%+ in places like the regional NT or a mining hub, paired with very different growth and risk.
What counts as a good rental yield?
There's no single magic number, but these are the bands investors work to in 2026:
- Under 3% — low. Typical of premium Sydney and Melbourne houses, bought for growth, not income.
- 3–4% — the typical capital-city range.
- 4–5% — solid for a capital city.
- 5%+ — strong.
- 6%+ — high, usually regional, unit-heavy, or carrying more risk.
But "good" only means something next to your costs. With the RBA cash rate at 4.35% and typical variable mortgage rates around 6% as at June 2026, a capital-city gross yield of 3–4% — and a net yield lower still — sits below the cost of the loan. That's why most capital-city investors are negatively geared: the rent doesn't cover the interest and costs, so they run a cash-flow loss and bank on capital growth (and the tax treatment of that loss) to come out ahead. Understanding that maths is the difference between an investment and an expensive hope.
Yield versus capital growth: the investor's real choice
Here's the trade-off that sits underneath every property decision: high-yield areas tend to deliver weaker long-term capital growth, and high-growth areas tend to have thin yields.
A blue-chip Sydney house might yield barely 2.6% but has a long history of strong price growth. A Darwin unit or a regional town might yield 6–7% but grow more slowly and less reliably. Neither is automatically "better" — it's a strategy choice between cash flow now (yield) and wealth later (growth). A high-yield property keeps your weekly budget comfortable; a high-growth one builds equity you can eventually use. Many investors using a rentvesting strategy deliberately chase yield first so the property pays for itself while they rent where they want to live. The current standout is Adelaide, which in early 2026 paired a respectable 4.3% yield with double-digit annual growth — the rare market doing both at once.
What drives a property's yield up or down
- Property type: units yield more than houses on gross figures, because they're cheaper relative to rent. Strata fees narrow that lead once you look at net yield.
- Location and price point: expensive markets (Sydney, Melbourne) have low yields; cheaper cities and regions have higher ones. High prices are the yield killer.
- Vacancy rate: a tight rental market (national vacancy was around 1% in early 2026) supports rents and protects your yield. A loose market does the opposite.
- Condition and renovation: a smart, cost-controlled renovation can lift the rent you can charge and nudge the yield up — as long as you don't over-capitalise.
- Furnishing and short-stay: furnishing or letting short-term can raise gross yield, but adds cost, management and vacancy risk that often eats the difference.
How to actually use yield when you buy
Yield is a useful comparison tool — it normalises income across very different properties and cities — but it's one input, not the verdict. Its blind spots are large: gross yield ignores costs, says nothing about capital growth, and doesn't factor in tax. A 6% regional yield and a 3% Sydney yield are not the same wealth outcome once you layer in growth, gearing and the capital gains tax you'll eventually pay.
So calculate the net yield, not the gross. Weigh it against capital growth prospects, your cash-flow capacity (check how much you can really borrow at stress-tested rates first), and your tax position including negative gearing and depreciation. Net yield plus capital growth plus your tax outcome — together — are your total return. Yield alone just tells you where to start looking.
Frequently asked questions
How do you calculate rental yield?
Gross rental yield is the annual rent divided by the property value, times 100. For a $650,000 property renting at $550 a week, annual rent is $28,600, so the gross yield is $28,600 ÷ $650,000 × 100 = 4.4%. Net yield subtracts annual ownership costs (rates, land tax, strata, insurance, management, maintenance, vacancy) before dividing — which on the same property might bring it down to around 3.0%.
What is a good rental yield in Australia?
As a rough guide in 2026: under 3% is low, 3–4% is the typical capital-city range, 4–5% is solid, 5% is strong, and 6%+ is high (usually regional or unit-heavy). But "good" depends on your costs — with mortgage rates around 6%, a capital-city yield of 3–4% sits below the cost of the loan, which is why most capital-city investors are negatively geared and rely on capital growth.
What's the difference between gross and net rental yield?
Gross yield is rent as a percentage of value before any costs — it's the figure quoted on listings and in market reports because it only needs rent and price. Net yield subtracts the annual costs of owning the property (council rates, land tax, strata, insurance, property management, maintenance and a vacancy allowance) first, so it reflects what you actually keep. Net is typically a full percentage point or more below gross, so always check it before buying.
Which Australian city has the highest rental yield?
Among the capitals, Darwin has the highest gross yield at around 6.0% in early 2026, helped by low property prices and the tightest vacancy rate in the country. Adelaide and Hobart follow at about 4.3%. Sydney is lowest at around 3.1%, because its very high prices compress the yield. Regional and mining towns can run higher again, sometimes above 8%, but with different growth and risk.
Do units have a higher rental yield than houses?
Yes, generally. Units out-yield houses by roughly 1 to 1.5 percentage points in most capital cities because they cost less to buy relative to the rent they command — nationally about 4.3% for units versus 3.0% for houses. The catch is net yield: strata and body-corporate fees are an extra cost on a unit, so the gross advantage narrows once you account for everything.
Is rental yield more important than capital growth?
Neither is automatically more important — it's a strategy choice. High-yield properties (regional towns, units, Darwin) give you stronger cash flow but typically slower capital growth. Low-yield blue-chip capital-city houses give thin cash flow but historically stronger long-term growth. Your total return is net yield plus capital growth plus your tax position, so the right balance depends on whether you need income now or wealth later.
Why are rental yields so low in Sydney and Melbourne?
Because yield is rent divided by price, and prices in Sydney (median around $1.3 million) and Melbourne are so high that even strong dollar rents produce a low percentage. These markets are bought primarily for capital growth, not income — investors accept a sub-3% yield and a negatively geared position in exchange for the long-run growth prospects of the underlying land.
Does rental yield include mortgage repayments?
No. Net rental yield subtracts the costs of owning the property — rates, land tax, strata, insurance, management, maintenance and vacancy — but not your mortgage interest. Interest is a financing cost that depends on how much you borrowed, not on the property itself, so it's handled separately in your cash-flow and gearing calculations rather than in the yield figure.
