Experienced landlords are accelerating the expansion of their portfolios
Improving rental yields and the prospect of stabilising interest rates are proving irresistible to some.
Domain calculated that a 4.34 per cent gross rental yields will cover the mortgage repayments on an average standard variable rate loan, taken on a 20 per cent deposit over 30 years. This excludes other holding costs.
This means houses in 11 per cent of all suburbs in NSW are earning high enough rents to cover the mortgage repayments and even putting some extra cash into the landlords’ pockets, according to Domain’s analysis. For units, this figure rises to 32 per cent of all suburbs in the state.
Some NSW towns, such as Broken Hill, Moree, and Cobar would likely produce positive cash flow as gross yields rise to 8.1 per cent, 7.5 per cent and 7 per cent gross yields respectively.
“I think what we’re seeing now is that rental yields are improving because we’ve got an extremely tight rental market where it’s pushing rents higher and a softening sales which is also helping to boost those yields,” said Nicola Powell, Domain’s chief of research and economics.
The strong performance of the rental market has accelerated the return of seasoned investors to the market, and Jack Henderson, founder of Henderson Advocacy, says competition for investors is likely to intensify in the coming months as yields continue to rise.
