Find the best property investment suburbs

IF you’re thinking of diving into the property investment market, Sydney and Canberra offer the best rental yields, according to RP Data.

Rental yields are the returns that property investors make on their investment in percentage terms. It's calculated by dividing the annual rental income by the purchase price of the property. So for example, if a landlord is getting $400 a week for a property which was bought for $450,000, the yield would be 4.6 per cent.

Yields fell last year as house prices rose quicker than rental rates. But as house price growth slows and the tight rental market leads to higher rents, yields are starting to pick up.

“With capital growth now softening nationally, rental increases are once again outpacing the house and unit price growth, leading to stronger rental yields,” said RP Data's national research director Tim Lawless.

RP Data looked at top performing suburbs within 10km of capital cities around the country. The highest gross rental yield in the country is for units in Darlington, Sydney, which has an average gross rental yield of 8.6 per cent.

Mr Lawless said both Sydney and Canberra have at least five suburbs with a gross rental yield of more than 6 per cent.

“Sydney and Canberra have the highest and second highest median house values of any capital city, which acts as another driver for the rental market,” he said.

"Sydney has exceptionally strong demand fuelled by a large rental market situated close to Australia’s largest employment node, while Canberra has the significant presence of public service."

He said high property prices were pushing more potential buyers into the rental market.

The Figures provided for Sydney in the article were:

City            Suburb        Median price   Weekly median   Gross rental
                                                   $                     rent $                yield %

Sydney       Darlington          228,000                  375                   8.6
                   The Rocks          670,000                1100                   8.5 
                   Haberfield          275,000                  375                   7.1
                   Haymarket         498,000                  650                   6.8
                   Greenwich         335,000                  425                    6.6

Source: RP Data