Rental Market Stays Tight as Yield Pressures Mount
Australia’s rental market remains under significant strain. Vacancy rates are at 1.6% nationally, well below the decade average of 2.5% and a fraction of the 3.3% average recorded in the ten years before 2020. For landlords, that means properties are letting quickly. For tenants, it means the search for a home remains deeply challenging.
Protecting Your Income Stream
Rental arrears remain one of the most common concerns amongst landlords, and understandably so. A single missed payment can quickly compound into a stressful and costly situation if it is not managed promptly and professionally.
Are You Claiming Enough Depreciation?
The end of the financial year has a habit of arriving before landlords feel ready for it, but it also brings a genuine opportunity.
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Rental Market Stays Tight as Yield Pressures Mount
Australia’s rental market remains under significant strain. Vacancy rates are at 1.6% nationally, well below the decade average of 2.5% and a fraction of the 3.3% average recorded in the ten years before 2020. For landlords, that means properties are letting quickly. For tenants, it means the search for a home remains deeply challenging.
Rents rose 0.6% in April, bringing annual growth to 5.7% – the fastest pace since October 2024. That translates to approximately $38 per week added to the national median rent over the past year. These are numbers that carry real weight for households already managing cost-of-living pressures, and responsible landlords and property managers remain mindful of that when reviewing tenancies.
Darwin leads annual rental growth, with house rents up 8.8% and unit rents up 9.8% over the year. At the other end of the spectrum, Canberra, Adelaide and Melbourne have seen rents rise by less than 5% per annum across both property types. Sydney remains the most expensive rental market in the country, with house rents at a median of $869 per week and unit rents at $775 per week.
Despite rising rents, gross rental yields remain modest in most capitals. Sydney houses are returning an average gross yield of 2.71% – the highest since May 2020, but still well below the cost of debt. Melbourne houses are yielding 3.25%, the highest since March 2015. Darwin offers the strongest gross yield at 6.0% for houses and 7.2% for units, with regional Northern Territory reaching 7.8%.
Many Investors Enduring Cashflow Loss
The yield gap matters. In most capital cities, gross rental returns sit well below current mortgage rates, even before holding costs are factored in. Cotality’s data makes clear that many recent investors are likely running at a cash-flow loss unless they contributed a substantial deposit. That is a meaningful consideration for anyone reviewing the financial performance of their investment property or contemplating entering the market.
Houses Performing Better That Units Unit yields are generally stronger than houses across most markets. Nationally, units return a gross yield of 4.5% compared with 3.3% for houses. In Perth, units are yielding 4.7%; in Brisbane, 3.9%. For investors focused on yield rather than capital growth, units in the mid-tier capitals may present the more compelling case.
Home values in Perth, Brisbane, Adelaide and Darwin continue to rise, with Perth up 26.0% annually and Brisbane up 19.7%. Investors who purchased in these markets in recent years have benefited from both capital growth and reasonable yield. Sydney and Melbourne tell a different story – values have eased in recent months, and with yields compressed, total returns depend heavily on the long view.
New Homes Supply Remains Insufficient
New dwelling construction continues to undershoot underlying demand, which provides some structural support for both rents and values.
However, with further interest rate rises expected through 2026 and household budgets already under pressure, landlords would be well served by taking a measured approach to rent reviews – one that balances their own financial obligations with the very real pressures their tenants face.
Gross Rental Yields Nationally
Sydney 3.1%
Melbourne 3.8%
Brisbane 3.3%
Adelaide 3.4%
Perth 3.6%
Hobart 4.3%
Darwin 6.0%
Canberra 4.0%
National 3.6%
Protecting Your Income Stream
Rental arrears remain one of the most common concerns amongst landlords, and understandably so. A single missed payment can quickly compound into a stressful and costly situation if it is not managed promptly and professionally.
The most effective protection begins before a tenancy starts. Thorough tenant screening is essential. We assess each applicant’s rental history, employment status, income-to-rent ratio and references before making any recommendation to you. That due diligence rarely makes headlines, but it prevents most arrears situations from arising in the first place. Once a tenancy is underway, consistent monitoring makes the critical difference:
Rent payments are tracked daily, with arrears action initiated at the earliest point permitted by legislation. Tenants in difficulty are contacted promptly and respectfully, as early communication often resolves short-term issues before they escalate. Payment plans, where appropriate, are documented formally to protect your interests
Landlord insurance with rent default cover adds a further layer of protection and is something we recommend all landlords consider with their insurer or financial adviser.
The goal is straightforward: your income should arrive reliably, every time.
Are You Claiming Enough Depreciation?
The end of the financial year has a habit of arriving before landlords feel ready for it. For those who own investment properties in Australia or New Zealand, it also brings a genuine opportunity: ensuring that tax depreciation entitlements are fully and accurately claimed.
Depreciation is one of the most consistently underutilised deductions available to property investors. Unlike maintenance costs or management fees, it requires no out-of-pocket expenditure. It simply reflects the natural wear of a building and its fixtures over time. Yet a significant number of landlords either claim it incorrectly or do not claim it at all.
What depreciation actually covers
Depreciation deductions generally fall into two categories. The first is capital works, which relates to the structural elements of the building itself. The second is plant and equipment, which covers the removable assets within the property: appliances, carpet, blinds, hot water systems and similar items.
The eligibility rules differ depending on when your property was built, when you purchased it and whether it is a new or established dwelling. Both the Australian Taxation Office and Inland Revenue New Zealand have specific requirements, and the rules have changed in recent years.
Why a depreciation schedule matters
A professionally prepared depreciation schedule, produced by a qualified quantity surveyor, is the foundation of any accurate depreciation claim. It documents every claimable asset and structure within the property, assigns values and outlines the deductions available over time.
We recommend that every landlord who does not already hold a current schedule discuss this with their accountant as a priority before 30 June. For New Zealand landlords, it is equally important to confirm current entitlements with a tax adviser, as depreciation rules on residential investment properties have shifted in recent years and continue to evolve.
Key points worth raising with your accountant or quantity surveyor:
- Whether your existing depreciation schedule reflects any recent renovations, upgrades or new appliances added to the property
- Whether a schedule has ever been prepared for the property at all, as many landlords have never commissioned one
- How recent legislative changes may have affected what you are entitled to claim
- Whether the depreciation method being used, prime cost or diminishing value, remains the most appropriate for your circumstances
Recent improvements can change your position
If any work has been carried out on the property during the past financial year, that activity may have created new depreciation entitlements. A bathroom renovation, a new hot water system or updated flooring all have depreciable value. Without an updated schedule, those entitlements may simply go unclaimed.
We make it a point to keep records of any works coordinated through our office so that this information is readily available when your accountant or quantity surveyor needs it.
Working with the right professionals
Tax depreciation is a specialist area. We work alongside our landlords’ accountants and, where relevant, refer them to qualified quantity surveyors who understand investment property thoroughly. The combination of accurate records, a current depreciation schedule and sound tax advice is what ensures you are not leaving legitimate deductions on the table.
EOFY arrives at the same time every year. The question is simply whether the groundwork has been done to make the most of it.
General information only. This article does not constitute financial or tax advice. Consider your personal circumstances and consult a registered tax adviser.
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