Investors budget for low rental yields

Property investors looking to buy in 2010 will be counting on capital gains because rental yields are low.

According to RP Data, Sydney houses are providing a gross rental yield of 4.2 per cent and Sydney units 5.1 per cent. Melbourne houses are returning gross yields (before costs) of 3.7 per cent — the lowest in the country — and Melbourne units are yielding 4.3 per cent.

With interest rates expected to continue to rise over the coming year, investors and first-home buyers would do well to build a margin of safety into their calculation of how much they should borrow, says the chief executive of financial comparison site, Shaun Cornelius.

Source: Sydney Morning Herald