Investor Insights
Home values have now fallen for six straight months, but rents have not followed. Cotality's latest rental data shows national rents up 5.5 per cent over the year to September, while its gross rental yield has climbed to 3.85 per cent, the highest since August 2019. For investors weighing up a purchase, and for owner-occupiers wondering whether to hold an investment property or sell, the equation has shifted.
The catch is a cash rate of 4.60 per cent. Stronger yields help, but they do not close the gap to current loan rates. Here is what the data shows and how we are advising clients across the country.
According to Cotality, national rents rose 0.5 per cent over the September quarter and are 5.5 per cent higher than a year ago. Monthly growth slowed to 0.3 per cent in seasonally adjusted terms, the smallest monthly rise since May 2025. The direction is still up, but the momentum is fading.
Tenants are feeling it. Cotality estimates rental households were spending about 34 per cent of their pre-tax income on rent as at June, the highest share on record in its affordability data. That ceiling on what tenants can pay is one reason growth is slowing.
Cotality puts the national vacancy rate at about 2.0 per cent in September, up from a record low of 1.5 per cent in February 2026. It remains well below the pre-COVID decade average of 3.3 per cent, so the market is still tight by historical standards. Other trackers measure vacancy differently, with SQM Research at 1.4 per cent in September and REA Group at 1.5 per cent, so the figures should not be compared directly across providers.
| City | Vacancy rate (Cotality, September 2026) | What it suggests |
|---|---|---|
| Hobart | 3.0% | Most balanced capital, tenants have more choice |
| Sydney | 2.3% | Tight, but easing |
| Brisbane | 2.1% | Tight |
| Perth | 2.1% | Tight |
| Adelaide | 1.4% | Tightest capital market |
A gross yield is annual rent divided by property value. It has reached 3.85 per cent because rents kept rising while the Cotality national index fell 1.1 per cent in September, its sixth consecutive monthly decline and a cumulative drop of 5.2 per cent since March. Part of the yield improvement is simply the denominator shrinking.
Illustrative example: an $800,000 investment property at the national gross yield of 3.85% earns about $30,800 a year in rent, or roughly $592 a week. An 80% loan of $640,000 at an illustrative 6.5% costs about $41,600 a year in interest alone, before council rates, insurance and management fees. The shortfall is the cost of holding the asset while waiting for growth.
This is why headline yield is a poor guide on its own. At today's rates, almost every geared investment is negatively geared on a pre-tax basis, and the question is whether you can carry that gap comfortably for several years.
Lower entry prices and stronger yields improve the starting position, but lenders are assessing serviceability against the RBA's buffer and discounting rental income. Borrowing capacity has fallen materially this year, so getting pre-approval and understanding your real ceiling comes first.
Falling values reduce equity. If you bought with a high loan to value ratio in the last two years, check where you now sit before assuming you can access equity for the next purchase. Rent reviews are worth doing while demand holds, though growth is slowing.
Owners considering keeping their current home as a rental when they upgrade should model the cost of the extra debt carefully. Refinancing the existing loan for a lower rate, or restructuring investment debt to interest-only for a period, can improve cash flow, but each option carries trade-offs we are happy to walk through.
Compare principal and interest, interest-only and fixed and variable structures side by side to see what your investment loan really costs.
Two things will shape the next few months: whether vacancy keeps rising toward the long-run average, which would pull rent growth lower, and the RBA's decision on Melbourne Cup Day, which will set the direction for borrowing costs. If rates rise again while rent growth slows, the holding cost of investment property widens further.
Not on their own. A national gross yield of 3.85% is the highest since August 2019, but it sits well below current variable investment loan rates. On an $800,000 property, gross rent of about $30,800 a year compares with roughly $41,600 of interest on a $640,000 loan at an illustrative 6.5%, before rates, insurance and management fees. Most investors rely on income, tax treatment and long-run capital growth to carry the gap, so serviceability and buffers matter more than headline yield.
Not necessarily. Cotality has national vacancy at about 2.0%, up from a record low of 1.5% in February 2026, but still well below the pre-COVID decade average of 3.3%. Rent growth has slowed to 0.3% a month in seasonally adjusted terms, which signals a cooling market, not falling rents. Conditions differ by city: Hobart sits at 3.0% while Adelaide is only 1.4%.
It depends on your buffers, not on timing the bottom. Lower entry prices and stronger yields help, but with the cash rate at 4.60% and values down 5.2% since March, lenders assess serviceability conservatively and equity can be thinner than expected. A broker can stress-test your position, check your loan to value ratio and compare lenders before you commit.
Disclaimer: This article is general information only and does not constitute financial, mortgage, or credit advice. Figures are sourced from Cotality and are subject to revision. The example is illustrative and may not reflect your circumstances. Speak with a qualified mortgage broker or financial adviser before making investment or loan decisions. Mankin Finance Pty Ltd holds Australian Credit Licence 389087.
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