Best Suburbs and Rental Yields for an Investment Property in Perth’s Metro
A contributing factor property investors consider when determining which property will support their property investment strategy is median rental yields and house price growth in a certain area
When it comes to the Perth property market, there are plenty of chances to achieve this.
Price growth in Perth’s property market has changed considerably over the last quarter, with the rental yield being consistently high in the suburbs, effectively urging property investors to find the best suburbs to put their money into in Perth.
If you’re an aspiring property investor yourself and are looking in Perth’s rental market, this guide will help you choose the suburb and property that will offer you some of the strongest rental yields
What Is Rental Yield?
Rental yield is the financial metric investors consult to measure the profit of a rental property, namely the return on investment (ROI) of renting said property. It’s calculated as a percentage of the property’s worth.
Note that there are two types of rental yields:
- Gross yield: it’s calculated by factoring in only rental income.
- Net yield: it factors in expenses invested into the property to make it rentable (such as money invested in providing modern amenities).
Determining the rental yield of a potential investment property is a crucial step, as it’ll give you insights into the gains you’ll be making.
How to Determine What Makes a Good Rental Yield
There are key factors to help you determine an excellent rental yield, like the type of property, whether or not there’s a strong demand in the property’s suburb and the prevailing conditions of the property market.
Nevertheless, a 5% rental yield or higher is a highly regarded percentage. Conversely, a rental yield of less than 4% is considerably low.
Keep in mind that too high of a percentage isn’t always a good indicator; for instance, if the yield is higher than 8%, the property might be undervalued. Similarly, if the yield you’re looking at is less than 4%, it could mean that the property is overvalued and the holding costs could impact your long-term capital position.
Why Would You Want a Higher Rental Yield?
Typically, investment experts recommend choosing properties with higher yields, as “properties with high yields generate steadier cash flow, which may be important for your investment strategy if you are looking for regular additional income.”
“However, yield is only one thing to consider. For example, many investors purchase in areas with high median prices and low rental yields. Rental yield may not be part of their investment strategy. They may be aiming for high capital growth over the longer-term or looking to negatively gear their investment, instead of seeking a steady income stream.”
Perth Among the Best Rental Yields in Australia
Although national rental yield has experienced a slight decline, slight differences in regional rental yields were recorded. Darwin, for example, came in the lead, with yields rising up to 6.55%, and it continued to rise over the quarter by 23 basis points. Darwin was closely followed by Perth’s yield, which rose to 4.72%, Hobart with a rental yield of 4.11%, Brisbane at 4.02%, Adelaide at 3.93%, Canberra at 3.92%, and, finally, Melbourne at 3.40%.
Source: CoreLogic Rental Review, Australia, October 2023
Top 10 Suburbs in Perth Metro Area by Rental Yield
With all of that said, here are some of the compelling suburbs to invest in. Note that this section includes suburbs existing in Perth metro areas and it excludes other suburbs in Perth; i.e., this section represents only a specific part of the Perth rental market. Furthermore, acquiring appealing houses or units below the suburb median prices will help boost the gross rental yields.
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East Perth
East Perth is one of the suburbs to evaluate investing in, with a gross rental yield of 4.85%, a median price of $850 for rent, an abundance of tenants, and its attractive location, which is very close to Perth CBD. The current vacancy rate stands at 2.5%.
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Mount Claremont
If you’re looking for suburbs with jaw-dropping vistas and lively communities, Mount Claremont is one of the best. Located just 9 kilometres away from the city centre, a blend of nature and modern living makes it an attractive hub for investors. The gross rental yield for this suburb is 3.47%.
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Mount Lawley
The Mount Lawley suburb is within close proximity to Perth CBD, boasts a yield of 3.25% and is well-known for its dynamic nightlife and community. These factors, combined with the $833 median rent, make it worth considering
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Swanbourne
Swanbourne is an expensive suburb and is located near some of the most prestigious schools in Perth, shopping precincts, and beaches. If you’re looking into investing in dwellings with high property value, Swanbourne is the ideal option, with a 3.15% rental yield and a median price of $1,193 for rent.
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Floreat
The gross rental yield for the Floreat suburb is 3.14% and is considered one of the best suburbs for being within close proximity to the CBD (a 10-minute drive) and Coast. Floreat is home to some of the best schools, restaurants, scenic beaches, and a considerably high median house price, which stands at $1,742,784.
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Mosman Park
Despite being a bit further away from CBD, Mosman Park is a great spotlight for both the Swan River and the Indian Ocean and has an attractive 3.11% rental yield that makes it investment-worthy. Due to the high Median median value ($1,882,771), an investment property in Mosman Park should be quite profitable.
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Claremont
Not to be mistaken with the Mount Claremont suburb, Claremont town has a lower rental yield (3.11%). This town is regarded as one of the greenest areas in Western Australia, with high house prices (median value stands at $1,814,163), making it an attractive investment property hub.
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Wembley
Wembley recorded 3.04% in gross rental yield, which still makes it a strong contender for property investment in Perth. With a median house price of $1,476,877, a median rent of $854, and being surrounded by natural beauty, this suburb is perfect for nature enthusiasts.
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West Leederville
Situated 3 kilometres away from Perth CBD, West Leederville is yet another suburb equipped with modern amenities and natural beauty that is ideal for rent. If you’re looking for an opportunity to invest in this suburb, consider its 3.01% rental yield and its median value of properties ($1,534,568).
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Nedlands
Similar to Mosman Park, this suburb stretches from the edges of the Swan River to the Indian Ocean. With a percentage of 2.95% for rental yield, the high median property ($1,917,269) in this area will help leverage your capital growth over time.
Why Invest in Perth Suburbs?
There are several reasons why investors will continue to invest in Perth’s suburbs. Here are some of the compelling reasons that draw residential property investment:
Strong Rental Yields
As seen from the list above, despite the steady decline in national yields, Perth’s strong and steady rental yields (which don’t dip below the 3% mark) are a promising investment prospect for many investors who are looking for suburban properties. A strong rental yield promises sustainable, steady income that isn’t affected by holding or running costs.
Strong Demand
Be it the green stretches of Claremont, the attractive overlooks of the Indian Ocean, or the close proximity to Perth CBD, the suburban areas of Perth metro are in high demand. Beaches, prestigious schools, and shopping centres are within reach of these areas, so tenants will prioritise their search for property rentals there by default.
Affordable Housing
Compared to other metros across Australia and depending on your financial situation, you’ll find Perth’s suburban properties quite affordable and these median values are expected to increase in the future.
Perth House Price Market Predictions in 2024
In 2023, the median house prices experienced an increase of 8% due to investors’ attraction to the area and this number isn’t forecasted to decline. In fact, Westpac, predicts another increase in these prices (8%).
On one hand, the median house prices are projected to jump to $690,000 by the first half of 2024, which is almost %50,000 more than the median house prices recorded in June 2023 ($638,000). While predictions point out that this number will likely decline by a small percentage by the end of the year, it’s also predicted it’ll increase again starting in 2025.
On the other hand, median unit prices are projected to grow by 3.9% by June 2024. This percentage is forecasted to fall to 1.3% and then steadily increase again with the start of 2025, much like median house prices.
Taking into account the population growth and the considerably low vacancy rates, the high demand in Perth and median values aren’t likely to change anytime soon.
For more information, read our full market predictions here.
Want To Talk About the Best Property in Perth for You?
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