This article is general information only and does not constitute financial or tax advice. Consult a qualified tax professional for advice specific to your situation.
Key takeaways
- Cotality's August 2026 Home Value Index put the national gross rental yield at 3.79%, the highest reading since September 2019 (Cotality Monthly Housing Chart Pack August 2026).
- The yield move sits on two mechanical drivers: dwelling values fell 0.9% in August and are now 3.6% below the March 2026 peak, and advertised rents rose 0.4% for the month and 5.7% over the year, taking the national median advertised rent to around $705 a week (Cotality Quarterly Rental Review).
- By capital city, gross rental yields ranked Sydney 3.3%, Brisbane 3.4%, Perth 3.9%, Melbourne 4.0% and Canberra 4.3%. Nationally, units yielded 4.6% against 3.5% for houses.
- SQM Research put the national vacancy rate at 1.3% in July 2026, keeping the rent side of the yield ratio tight (SQM Research National Vacancy Rates).
- The June quarter ABS Lending Indicators showed new investor loan commitments down 10.2% by value and 8.6% by number (ABS Lending Indicators), a pullback that on a yield chart reads as one less bidder at every open home.
- On a $550,000 unit at a 4.6% gross yield, gross rent is about $486 a week. Against a $440,000 investment loan at 5.90% variable interest-only, gross rent roughly covers gross interest, and the deductible cost stack (rates, insurance, strata, agent fees, repairs, Division 43 capital works depreciation) becomes the negative gearing loss, not the interest gap.
- Purchases of established dwellings settled after 12 May 2026 lose negative gearing from 1 July 2027 and drop the CGT discount from 50% to 25%. New builds retain both concessions. That changes the after-tax return equation on any spring 2026 purchase, not just the pre-tax yield.
- The RBA Board meets on Tuesday 29 September 2026 at 2:30pm (RBA calendar). Aussie has NAB tipping a 25bp hike to 4.60%, ANZ and CBA seeing November and Westpac holding through 2026 (Aussie, RBA expert predictions).
- For a landlord this spring: get three written rate quotes, run the buying scenario at both 4.35% and 4.60%, price strata and land tax against the yield line rather than a growth assumption, and confirm the Div 40 and Div 43 depreciation position on any post-9 May 2017 build.
This article is general information only. It does not consider your personal circumstances and is not tax, credit or investment advice. Speak to a registered tax agent, mortgage broker or property lawyer before acting on any of the figures below.
The number#
3.79%. That is the national gross rental yield reading Cotality published in its August 2026 Monthly Housing Chart Pack, and it is the highest reading on the series since September 2019 (Cotality Monthly Housing Chart Pack August 2026).
For a landlord holding stock through the current values downcycle, that number is the piece of arithmetic that reframes the whole ledger. Values have fallen for a fifth consecutive month on PropTrack's national index and for the third quarter running on the June quarter turnover reading Sarah Hunter gave at the AFR Property Summit. The stress prints are climbing. The RBA still has a live case for a 29 September hike. Every reading in the market screams downside.
Except the one that measures how many rent dollars come back to a landlord for every hundred dollars of dwelling value on the balance sheet. That reading has quietly done the opposite of what the headlines suggest. It has widened.
That widening is not a story of rising rents alone. It is a story of rising rents landing on top of falling values. Both sides of the ratio have moved to compound the same result.
What Cotality actually printed for August#
The August 2026 Cotality Home Value Index reported the national dwelling value down 0.9% for the month and 3.6% below the March 2026 peak. Every capital city recorded a monthly decline for the fifth consecutive month, with Sydney -1.4%, Melbourne -1.1%, Brisbane -1.0%, Adelaide -0.8%, Perth -0.8% and Hobart -0.2% (Cotality Monthly Housing Chart Pack August 2026).
On the rent side, advertised rents rose 0.4% in August and 5.7% over the year to a median of about $705 a week (Cotality Quarterly Rental Review). That is roughly $38 a week on the national median in twelve months, against a wages line the June quarter WPI print recorded at 3.2%.
The vacancy backdrop that keeps the rent line firm is the SQM Research July 2026 national vacancy rate of 1.3%, a reading that has held inside the tight-market range across every capital city through 2026. On that supply line, the annual rent growth number does not need a sharp acceleration to keep the yield ratio expanding while values retrace.
The city-by-city read#
Gross rental yields by capital city, on the August 2026 Cotality print:
- Sydney: 3.3%
- Brisbane: 3.4%
- Perth: 3.9%
- Melbourne: 4.0%
- Canberra: 4.3%
Nationally, units yielded 4.6% against 3.5% for houses. The 1.1 percentage point gap between the two lines carries most of the yield-expansion story in the current cycle.
Sydney remains the lowest-yielding capital because it starts from the highest median dwelling value in the country. The Sydney values decline has actually been the sharpest of any capital in dollar terms, but the rent side has grown less quickly than in Perth or Adelaide, so the ratio widens less. Sydney at 3.3% is still a yield that a landlord funding at 5.90% variable will not cover in cash flow terms without material depreciation deductions or a leverage ratio well below 80%.
Perth at 3.9% and Melbourne at 4.0% are the interesting mid-band prints. Perth is a state final demand story with wage growth support and a rental market that continues to run tight. Melbourne is a values recovery story where the March 2022 peak sits 6.8% above the current print, meaning a spring 2026 buyer enters at a level that a March 2022 buyer paid roughly $47,000 more for on the same $650,000 property, and the yield on that entry price starts at 4.0% instead of the low 3s.
Canberra at 4.3% is the yield leader but sits inside a policy framework where the ACT's rent cap at CPI plus 10 percentage points and the standard tribunal posture on rent increases sets a functional ceiling on the rent line. The 4.3% is real, but the growth from here is capped in a way it is not in Perth or Melbourne.
Why yields widen in a values-decline market#
Gross yield is defined as annualised advertised rent divided by dwelling value. It has two sides. When rents rise and values fall, both sides move in the direction of a higher ratio at once.
That is the mechanical driver of the current print. The interesting question is why both sides move together at this point in the cycle.
Rents rise because supply is tight. The SQM Research July 2026 national vacancy rate of 1.3% is inside the range that historically produces landlord pricing power on lease renewals. The June quarter ABS Lending Indicators show new investor loan commitments down 10.2% by value and 8.6% by number in the quarter. That is less new stock coming into the rental pool on the investor-loan side, at a time when net overseas migration is still running above 300,000 a year and the National Housing Accord 1.2 million homes target is running well behind schedule.
Values fall because the transmission of the three 2026 cash rate hikes is still working through borrower cash flows. The official cash rate at 4.35% has variable investor rates in the 5.89% to 6.35% range on Canstar's tracker, against a peak monthly repayment on a five-year fixed rate at 2.29% from 2021 that most legacy fixed loans have now rolled off. The June quarter national accounts had household mortgage interest costs up 10.4% for the quarter, and the Roy Morgan mortgage stress line prints 32.5% of holders at risk on the July reading.
The point of intersection between those two lines is the current values downcycle. The point at which the rent line keeps growing while values retrace is the point at which the yield expands.
What the yield print actually funds#
A $550,000 unit on a 4.6% gross yield rents for roughly $25,300 a year, or $486 a week.
Against a $440,000 investment loan at a 5.90% variable interest-only rate, annual interest is roughly $25,960. Gross rent covers gross interest.
That is the cash-flow milestone that the market has not seen since 2019 on unit stock at capital-city medians. It does not make the property cash-flow positive because the deductible cost stack still runs to about $8,000 to $12,000 a year on a typical strata unit (rates, water, insurance, strata levies, agent management fees at 6-8% of rent, repairs and maintenance, land tax where applicable). What it does is convert the interest-rate risk from an income-covering risk into an operating-cost risk. Those two are not the same underwriting task.
On a $650,000 house at a 3.5% gross yield, the same maths runs the other way. Gross rent is about $22,750 a year. Against a $520,000 investment loan at 5.90%, annual interest is roughly $30,680. The rent shortfall is $7,930 before deductible costs. That is the position most 2022-2024 house buyers still sit in on the current rate book.
The yield-expansion story is really a unit story with a house-country tail. Landlords buying now on the unit book get a materially different starting position from landlords buying now on the house book.
The tax overlay changes the story#
The pre-tax yield does not carry the whole picture. The negative gearing and CGT reforms announced on 12 May 2026 apply the following rules to any purchase from 12 May 2026:
- On an established dwelling contracted for after 12 May 2026, negative gearing losses cannot offset non-property income from 1 July 2027 onwards. Losses carry forward against future rental income and future capital gains, but the current-year salary offset is gone. The CGT discount also steps down from 50% to 25% on those established dwellings.
- On a new build, both negative gearing and the 50% CGT discount are retained under the transitional new-build carve-out.
That distinction changes the after-tax yield equation materially. On a 4.6% gross unit yield with a $7,000 to $10,000 first-year deductible loss after depreciation, a new build purchase keeps a marginal-tax-rate refund on that loss (roughly $3,300 at the 47% top bracket or $2,300 at the 32.5% bracket). An established dwelling purchase from 12 May 2026 onwards loses that current-year refund from 1 July 2027, and the loss instead sits as a carry-forward asset against future rent or gain.
A spring 2026 buyer choosing between an established unit at 4.6% and a new build unit at 4.4% on the same street should be running both numbers on an after-tax basis, not just comparing headline yields. The transitional rules on the 1 July 2027 changeover mean the pre-tax yield picture and the after-tax return picture point at different assets.
The rate call sits on top of the yield call#
The RBA Board meets on Tuesday 29 September 2026 at 2:30pm (RBA calendar). Aussie's economist tracker has the calls split: NAB tips a 25 basis point hike to 4.60% on 29 September, ANZ and CBA both see November, and Westpac holds through 2026 (Aussie, RBA expert predictions).
A September 29 hike to 4.60% at full pass-through adds roughly 25 basis points to variable investor rates in the fortnight after the decision. On a $440,000 interest-only investor loan, that is about $1,100 a year, or $21 a week. Against a 4.6% unit yield with rent at $486 a week, the after-interest gap widens by roughly the same $21 a week. A hold at 4.35% keeps the current 5.89% variable band live for the December quarter.
The September quarter CPI print lands on Wednesday 30 September, the day after the Board meets. The RBA sits without the number it would ordinarily wait for, which is one of the reasons the September call remains live rather than deferred to November as a matter of process.
For a landlord acting on the current yield-expansion window, the rate call matters most in the retention conversation. If a purchase settles in the December quarter at the current variable band, the retention team you speak to in April 2027 sets the year-two operating economics of the property. Getting the November-quarter rate right is the year-one story. Getting the retention pricing right is what makes the yield hold across the loan life.
Five things a landlord actually does with the 3.79% print#
One. Get three written variable rate quotes from at least three lenders, one Big 4 and one second-tier, at both new-customer and existing-customer investor bands. The current market-leading variable sits around 5.69% for owner-occupier refinancers and around 5.99% for investor interest-only with the sharpest lenders (Canstar Big 4 rate compare, Mozo home loan rate check).
Two. Run the buying scenario on both a 4.35% hold and a 4.60% hike through the Propkt mortgage calculator. The delta is roughly $21 a week on a $440,000 interest-only loan. Both need to sit inside the property's monthly cash-flow envelope.
Three. Price the strata report for any unit purchase against the 4.6% unit yield rather than an assumed capital growth number. Sinking fund status, special levies, planned works and outstanding defects can move net yield by 60-100 basis points on an ostensibly high-yield unit.
Four. Get a Division 40 and Division 43 depreciation quote from a qualified quantity surveyor on any post-9 May 2017 build. Plant and equipment on used items is no longer deductible for post-2017 second-hand purchases, but capital works on eligible original construction still is, and the first-year deduction typically runs $4,000 to $9,000 on a modern unit. That number goes into the net yield calculation.
Five. Confirm the tax position on established versus new build for the 12 May 2026 negative gearing and CGT changes. On the 1 July 2027 changeover, the after-tax return equation shifts materially against established dwellings and towards eligible new builds. The pre-tax 3.79% national yield print is real, but the after-tax version is where a spring 2026 buyer actually funds the property.
Track the numbers that matter with Propkt#
The 3.79% national yield reading is a snapshot. What matters for a landlord is whether the yield holds across the life of the loan and whether the running deductions the ATO expects to see are actually recorded against each property in the portfolio.
Propkt tracks the rent, expense, interest and depreciation lines that turn a headline yield into an after-tax return. Log rent as it clears, capture receipts against the expense categories the ATO deducts against rental income, and generate a tax-summary export for your accountant at the end of the year. The rent-to-interest cash-flow read at the top of the dashboard is the one that tells you whether the yield-expansion story you bought on is actually landing in the account.
The next reading to watch is the Cotality September 2026 Home Value Index on 1 October and the RBA Board decision on 29 September at 2:30pm. Both land in the fortnight after this post. Both will move the yield line one way or the other.