Data from PropTrack shows that despite interest rates reaching their highest point in 12 years, many regions domestically still offer high rental yields, enough to offset mortgage pressures. These areas not only have high rental yield returns but also show a significant trend of rising property prices.

Total rental yield is an important metric for investors, referring to the annual pre-tax rental income received as a percentage of the property purchase price. Generally, higher output results in higher returns. Eleanor Creagh, senior economist at PropTrack, says high returns mean these areas are more suitable for investment, especially for investors focused on cash flow.

While total rental yield provides a useful starting point, it does not account for holding costs such as interest and management fees, thus only providing net rental yield. Creagh emphasizes that even slightly lower-yielding high-growth areas can still be attractive to investors.

Australia's rapid population growth and shortage of rental properties are creating a crisis in the real estate market, prompting investors to quickly return to the market. According to the latest data from the Australian Bureau of Statistics, investor loans have increased by 36% compared to a year ago. Ms. Creagh points out that investors are returning to a very hot market, especially in areas where property prices are rising rapidly.

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According to the latest PropTrack rental report, although recent rental increases have slowed, they still outpace property price increases, resulting in the highest total returns in the past four years. Creagh explains that during the COVID-19 pandemic, rental yields declined as interest rates were low and property prices rose faster than rents. However, strong recent rental increases are now restoring yields.

In the second quarter, the total rental yield in metropolitan areas was 4.3%, while the overall yield in Australia was 4.6%. Villa rental yields reached 3.9%, while apartments were at 4.9%. In some domestic areas, yields are more than double the above figures due to higher property values and rents, attracting more investors.

The best-performing areas in Sydney are on the Central Coast, such as Killarney Vale, Watanobbi, and Blue Haven. Real estate agent and LJ Hooker Tumbi Umbi & Killarney Vale manager Justin Bond says more investors are attracted to buying in these areas due to high rental returns and expected property price growth. Bond notes that over the past three months, many investors have returned to the market, primarily due to rental returns, with Killarney Vale also appreciating rapidly over the past year.

In the northern suburbs of Adelaide, some villa yields exceed 5%, such as Elizabeth North, Smithfield Plains, and Davoren Park; in the outer suburbs of Hobart, such as Gagebrook, Clarendon Vale, and Bridgewater, yields are also high. Similar situations exist in some areas of Ipswich, west of Brisbane, including Laidley, Churchill, and North Booval.

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Many outer suburbs of Perth have yields exceeding 6%, such as Hilbert, Medina, and Stratton. Despite Perth's rapid property price growth compared to other capital cities, it remains the most sought-after rental market domestically. In Darwin, the highest villa rental yields are in the Palmerston area, including Moulden, Gray, and Woodroffe, with yields reaching 7%.

Ms. Creagh says that the differences in rental yields in capital cities are mainly due to differences in property prices, local economies, and market conditions. Darwin has the cheapest capital city market, with property prices far lower than Sydney's, but relatively higher rental yields.

For apartments, both inner-city and out-of-CBD areas can offer high rental returns. For example, some relatively inexpensive apartment areas in Sydney, such as Auburn, Lakemba, and Granville, can yield up to 6%. In parts of inner-city Melbourne, such as Carlton and the CBD, rental yields range from 6% to 7%. Caulfield East has the highest apartment rental yield among all capital cities, reaching 10%.

Investment expert and head of the University of Adelaide's Real Estate Master's Program, Peter Koulizos, says that while unit yields are higher than villas, investors should not only consider total returns. Units are easier to rent out with low vacancy rates, but incur additional costs such as property management fees and reserves. While total returns may look good, net returns may not be as attractive.

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Some of the highest villa yields are in mining areas such as Kambalda West, South Hedland, Collinsville, Pioneer, and Broken Hill. These mining towns have high rental yields due to mining prosperity, but their rental yields are affected by fluctuations in resource prices and mining investment. When mining investment increases, accommodation is needed for workers, causing property prices and rents in mining towns to rise; however, if resource prices fall or mining operations cease, property prices can quickly decline.

Ms. Creagh says that the relationship between total rental yield and property prices is inverse; higher property prices tend to result in lower rental yields, and vice versa. In areas with high property prices, rental yields are generally lower relative to the rate of property price increases. Conversely, in areas with lower property prices, although rents may not be high, yields can be higher.

The data also lists the areas with the fastest property price growth over the past five years. In some areas, property prices have doubled over the past five years, with median villa prices in most areas rising by $50,000. North Adelaide and Queensland mining towns are among the top ten. Meanwhile, in recent years, rural and coastal areas have seen rapid property price increases, especially in the Gold Coast and Sunshine Coast regions.

Ms. Creagh says that investment should consider not only rental yields and appreciation but also other factors such as time to rent out and additional costs like property fees, maintenance, insurance, and taxes. Finding the best investment opportunities requires consideration of local market conditions, property types, and investor strategies for cash flow and capital gains."