“Is this a good yield?” is the question every investor asks and the one with the least satisfying answer, because a yield only means something next to its context. A 6% gross yield on a regional unit and a 3.5% gross yield on an inner-city house can each be exactly right for the investor who bought them. This guide gives you the context to judge a yield rather than a number to memorise.
If you have not yet worked out your own figure, start with how to calculate rental yield — and be clear whether you are judging a gross or a net number, because the benchmarks differ.
Why there's no single right number
Yield is a ratio between two things that vary enormously by market: rent and price. In high-growth capital-city markets, prices have run far ahead of rents, which mechanically pushes yields down — a low yield there is normal, and often sits alongside strong capital growth. In cheaper regional and outer markets, prices are lower relative to rent, so yields are higher, frequently alongside slower growth.
So a “good” yield is not a fixed threshold. It is a yield that is appropriate for the property's type and location, and that fits the role the property plays in your strategy. The rest of this guide unpacks each of those.
Typical ranges to anchor against
These are broad reference ranges for Australian residential property, not targets. They move with interest rates and the property cycle, so treat them as a way to tell “normal” from “unusual”, not as a pass mark.
Roughly 2%–3.5% gross
Common for houses in established capital-city suburbs, where high prices suppress yield. Usually a growth-oriented hold rather than an income play.
Roughly 3.5%–5% gross
A typical middle band — many units and outer-metro or larger-regional houses sit here, balancing some income with some growth potential.
5%+ gross
Higher-yield territory: regional towns, some units, dual-income or specialist properties. Attractive income, but worth asking what is keeping the price low.
Remember these are gross ranges. Net yield, after costs, typically lands around three-quarters of the gross figure — so a 5% gross yield is closer to 3.5%–4% in your pocket. See gross vs net rental yield for why the gap matters.
It depends on type and location
- Houses vs units. Units usually show higher gross yields than houses, but strata fees eat a bigger share of rent, so the net gap narrows. Houses often carry more of their return as land-driven capital growth.
- Capital city vs regional. Regional and outer-suburban markets typically yield more; inner-city and blue-chip markets yield less and lean on growth. Neither is better — they are different strategies.
- Standard vs specialist. Student accommodation, serviced apartments, dual-occupancy and short-term rentals can post eye-catching yields, but they come with thinner resale markets, higher management intensity, and lending restrictions.
The yield–risk trade-off
The single most useful instinct to develop is suspicion of very high yields. In an efficient market, an unusually high yield is rarely a free lunch — it is usually the market pricing in a risk. That might be weak or negative capital growth, an economy built on a single employer or industry, oversupply of similar stock, a short building lifespan, or difficulty reselling.
This does not make high-yield properties bad; plenty of investors deliberately and successfully target income. It means a high yield is a prompt to ask “why is this cheap relative to its rent?” rather than a reason to celebrate. A good yield is one you understand the source of.
Good compared to what?
A yield only earns the word “good” relative to what else you could do with the money. Three comparisons are worth making:
- Against the risk-free rate. If a term deposit pays close to your net yield, the property has to justify itself on capital growth, because you are taking on far more risk and illiquidity for a similar income.
- Against your borrowing cost. When net yield sits below your mortgage interest rate, the property is negatively geared — it costs you money to hold, on the expectation that growth makes up the difference.
- Against comparable properties. The most practical benchmark is simply other properties of the same type in the same area. That is where an unusually high or low yield actually stands out.
How to judge your own yield
A practical checklist for deciding whether a yield is good for you:
- 1. Is it net or gross? Compare like with like.
- 2. How does it sit against comparable properties in the same market?
- 3. What growth do you expect alongside it — is this an income or a growth play?
- 4. If the yield is high, what risk is the market pricing in?
- 5. Does the net yield cover, or fall short of, your borrowing cost?
A yield that clears those questions with answers you are comfortable with is a good yield — regardless of whether the number is 3% or 6%.
Because yield is only ever half of the return, the natural next question is how it trades off against the other half. That is the subject of rental yield vs capital growth.
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