Ep. 16: Rental Yields - What Do They Tell Us About the Suburb and Property

In this episode, we dive into a fascinating discussion about what rental yields reveal about suburbs and properties.
We challenge the common belief that a stable 6% rental yield might limit annual capital growth to 4%. Our analysis of data reveals a surprising trend. Properties with yields around 6% have seen an average annual capital growth of 7.7%. We also compare growth patterns between regional markets and capital cities, uncovering unexpected similarities that defy traditional investment assumptions.
Tune in and start building your sustainable path to financial independence in the Australian property market.
Episode Highlights:
00:00 - Introduction
01:00 - What is Rental Yield?
01:28 - What drives a property rental yield
05:15 - Not our comments
07:00 - Regional vs State Capitals
11:55 - High Yield vs Low Yield
16:03 - Conclusion
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DISCLAIMER:
• Please be aware that the content presented in this video is for general informational purposes only and does not constitute financial advice.
• The information provided is not tailored to your individual circumstances, and we do not consider your specific financial situation.
• It is strongly recommended to consult with a qualified financial advisor or professional before making any financial decisions based on the content of this video, as we have neither offered nor provided legal, financial, or taxation advice to the Listener, Reader, or Viewer.
• We do not hold an Australian Financial Services Licence as defined by section 9 of the Corporations Act 2001 (Cth) and is not authorized to provide financial services.
• Any actions taken by viewers based on the information in this video are at their own risk.

[@dude633]

Great content. It's fantastic to see the limits of the data being discussed.

[@ericpark1934]

Thanks for the great content! For some reason, I always understood that higher capital growth comes from lower yielding properties and less capital growth from higher yielding properties. Is this an incorrect understanding of the property market?

[@suburbdata]

Hi @ericpark1934, lower yielding areas have not shown any clear historical evidence of outperforming higher yielding areas. Each market has a time when it booms. It's not about "where" you buy, but "when" you buy.

[@DavidW-n1h]

Great to see you guys busting some of these myths about "investment grade property" that are pedaled by so-called experts. I actually did an analysis on investing in lower yield, higher growth potential property vs and "average" property; and found even at growth rates of 8.5% p.a. (for lower yield) vs 6.5% p.a. (for higher yield) you are in a much better position with the higher cashflow for both holding your property and then going on to buy a second property.
So this myth has been double-busted !

[@suburbdata]

Thanks @DavidW-n1h. I sometimes wonder where these myths come from. So many of them. I think it is content marketing. Making something up is a lot easier than doing the research to uncover the truth. And if delivered with confidence, novices swallow it.
Plus, some of the pedallers have offices closer to the CBD of state capitals, so it suits them to say those areas are the best to invest in.

[@OilBaron100]

What an eye opener. Great content guys.

[@coucherdusoleil444]

Such an insightful content guys! Thank you for making it easy to understand. Great job! 🎉

[@suburbdata]

Glad it was helpful @coucherdusoleil444.

[@apropguru]

I know exactly who you are talking about. Agree he puts out a lot of good content which I am grateful for, but his views on property investing are quite archaic and no amount of data is able to change his mind.

[@anoopputhukudy3910]

Hi Damien and Jermey, would like to know your thoughts on the 18.6 years predicted property cycle and what will be the impact of this in Australian economy? Thanks Anoop

[@suburbdata]

Hi @anoopputhukudy3910. We don't have nearly enough historical data to thoroughly investigate such a long cycle as 18.6 years. And looking back to 1990 from today, there are peaks and troughs in the property market all over the place. Where does one draw the line to say, this is a cycle, but that is not?
Do we examine the cases when values had negative growth? If so, there were 5 and not evenly spaced and of varying durations.
Do we examine cases when values were flat? If so, there were about a dozen but not evenly spaced and of varying durations.
Do we look for cases of growth exceeding the rate of inflation? It looks to be around about 8 cases.
Do we look for cases of double-digit growth per annum? If so, there were 6 and again, not evenly spaced and of varying durations.
There have been 2 cases in the last 34 years of national growth exceeding 20%pa and guess what, the gap between peaks was a bit over 19 years. One case is hardly what I would call a "cycle" but there's something for believers to hang on to. It looks like this cycle can predict catastrophes too (COVID). Or is it coincidence?

[@anoopputhukudy3910]

@@suburbdata Thank you very much for the reply.

[@dimitriosmpilias32]

What is considered a good rental yield.

[@suburbdata]

By Melbourne standards, anything above 4% is pretty good. But by Adelaide or Perth standards, that might be ordinary and 5% might be considered good.