Rising yields and who benefits from them

The Australian reported that falling prices and rising rents could lift rental yields to their highest level this century, on SQM Research’s forecast. PIPA Chair Cate Bakos warned against the idea that investors can raise rents at will to cover their costs.

What the article reported

Anthony Keane reported in The Australian on the 3rd of September 2026 that the national gross rental yield had reached 3.79 per cent, its highest level in six years, according to Cotality. SQM Research managing director Louis Christopher put unit yields at 4.9 per cent and house yields at 3.8 per cent. He forecast rises to about 6.2 and 5.2 per cent respectively over two to three years.

The article’s worked example showed the arithmetic. A $1 million property earning 3.8 per cent would yield 5.1 per cent if its value fell 10 per cent and its rent rose 20 per cent. It argued that long-held, lightly geared properties stand to benefit most, while younger investors have left the market.

Cate Bakos on rents

Cate Bakos, Chair of PIPA, said she had seen rents increasing and that property managers were describing pressure on rents, making conditions very hard for renters. She said investors buying established property had almost disappeared since the budget, and that some existing investors, although grandfathered for negative gearing, were looking to sell after being hit by rental reforms and compliance requirements.

One of the misnomers that I see out there is people suggesting that investors put their rents up deliberately to counteract the heightened cost of ownership. It doesn’t work like that, markets don’t respond like that, and tenants will vote with their feet.

Cate Bakos, Chair of PIPA, quoted in The Australian, the 3rd of September 2026

What a higher yield measures

A rising yield can come from a rising rent or a falling price. The article’s example relies on both, and on a 20 per cent rent rise that the market has not yet produced. Mr Christopher noted that the expected rent increases were not yet showing in SQM’s asking rent data. Cotality head of research Gerard Burg pointed to the limit: rents are already at a record share of median household income, which constrains how far they can rise.

For an existing owner, a higher yield on today’s value says little about their own position. Their return depends on the price they paid, the debt they carry and their costs. For a buyer, a higher yield means a lower price relative to rent. That improves the purchase only if the rent holds and the costs are known, which is the point Ms Bakos made about rents set by the market rather than by the landlord.

Costs that a gross yield leaves out

Ms Bakos cited land tax, compliance obligations and property management fees among the pressures on investors’ holding capacity. None of them appears in a gross yield. Before relying on a yield figure, an investor should establish:

• The net yield after land tax, insurance, rates, management fees, compliance costs and maintenance.
• The vacancy rate and rent trend for comparable properties in the specific suburb.
• The rent a tenant in that market can sustain as a share of local incomes.
• The investor’s own cash flow position at current and higher interest rates.

Gross or net

A yield quoted in marketing is usually gross. An investor should ask which it is, and what rent and costs sit behind it, before relying on it. QPIA accredited advisers can be located through PIPA’s adviser search. The rental supply outlook is covered in a higher vacancy rate that may not last.