Despite the slowing rental market and higher prices squeezing rental yields, investors are seeing their cashflow improve thanks to falling mortgage rates.
Over the past three months to September, average rents fell by 0.5 percent across the capital cities while the gross yields dropped to 3.99 percent.
The average fixed-rate mortgage also declined to 3.6 percent, roughly matching the rental returns.
Tim Lawless, research director at CoreLogic, said the gap between rental yields and home loan rates has narrowed dramatically, so landlords are now in a better cash flow position than they were a year ago when the yields were 4.14 percent.
“I can’t remember a time when there’s been virtually zero difference between the gross rental yields and what the cost of debt is,” he said.
