Investor opportunity: Tropical north Queensland comes out on top with highest rental yields in Australia

Cairns is known for many things: its tropical lifestyle, stunning natural beauty and being the gateway to the Great Barrier Reef.

Now it can also add Australia’s top place in which to purchase an investment property, after the latest rental data reveals Cairns has some of the country’s highest unit gross rental yields.

According to Domain’s latest Rent Report, several suburbs are attaining yields of 8 per cent, which is “basically cash flow positive”, says Domain chief of research and economics Dr Nicola Powell.

By way of comparison, in Brisbane, the median unit gross rental yield is 5.73 per cent, and in Sydney (the most expensive capital city in which to rent a unit) it is 4.52 per cent. 

“Gross rental yield basically looks at what the price of a property would be and what’s the rental income on that property,” Powell says. “It’s the income from rent versus how much it would cost you to purchase that house.”

“When you have a yield of over 7 or 8 per cent, that is a very strong yield. It’s cash-flow positive.”

The suburb of Bungalow is just 2.8 kilometres from Cairns CBD and currently has Australia’s highest median gross rental yield at 8.93 per cent. Apartments there have a median price of just $200,000 – which is merely a deposit in the Sydney property market. 

SOLD - $445,000

9/207 Abbott Street, Cairns North QLD 4870

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Local real estate agent Udo Jattke of New Level Real Estate says he’s seen many interstate investors flocking to Cairns due to its high rents and affordable property prices.

“People have seen that value – and they have for a while – but it’s only increased, obviously, after COVID,” he says.

Jattke adds that the slowdown of new unit construction has affected the number of apartments available, tightening options for renters. 

“Four years ago, there were 2000 properties for sale in Cairns. There’s about 700 now,” he says.

Chris Dunham of Dunham Realty calls the Cairns rental market “absurd” for renters, with a vacancy rate of 0.7 per cent, which is low even compared to major cities like Sydney and Melbourne.

“There is no waiting time [for rental properties],” he says. “I just left two viewings now. Both of those properties will be let in the next hour.”

$525

2/16 Nelson Street, Bungalow QLD 4870

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Dunham says investors are “buying with their calculators rather than with a map” and are being quickly swayed by the high rental yields.

Despite the attractive situation for investors, Powell warns that being swayed by substantial rental gross yield numbers could be risky, and those looking to invest need to do property research on the area they are buying in.

“Gross rental yield is a good indication, but you also want to make sure you’re investing and purchasing a property in a market that does have strong demand for rentals, because you don’t want to be just honing on a high growth yield when perhaps the demand isn’t quite there.

“That’s when things like the vacancy rates are really important as well to understand that balance and overall what the level of demand is like for that particular suburb.

“You want to know the tenant demand or rental demand. You want to know what the overall competition will be like. And you’d want to know what the economy is driven by, and if it is cyclical like a mining town, and are you willing to take that risk.”