According to a recent report by The Sydney Morning Herald, Australian property investors are increasingly weighing up the balance between capital growth and rental yields when choosing where to put their money. While Sydney and Melbourne remain the nation’s largest markets, cities like Brisbane, Perth and Adelaide are drawing attention for offering stronger combined returns.
Cotality’s latest Home Value Index shows that Sydney and Melbourne homeowners recorded identical total annual returns of 5.1% to the end of August. But the drivers of these returns differ: Sydney achieved stronger capital gains, while Melbourne provided better rental yields. Melbourne’s gross rental yield reached 3.7%, compared with Sydney’s 3.0%, highlighting the divergence in investor opportunities between the two capitals.
Brisbane Leading the Charge
Brisbane emerged as the standout performer, posting 7.9% annual capital growth and a total return of 11.6%. Industry analysts point to interstate migration, limited rental supply, and Olympic-related infrastructure spending as key tailwinds. Rich Harvey, CEO of propertybuyer.com.au, said Brisbane is currently offering investors “the best of both worlds,” combining growth and yield.
Perth and Adelaide holding strong
Perth and Adelaide also delivered impressive results, with total returns above 10%. Perth recorded 6.6% capital growth and an 11.2% total return, while Adelaide achieved 6.5% growth and a 10.2% total return. Both markets have benefitted from affordability relative to Sydney and Melbourne, and steady population inflows are keeping demand elevated.
Sydney and Melbourne: value versus yield
While Sydney’s median home value remains the highest in the country at $1.22 million, its rental yields are among the lowest. Melbourne, by contrast, offers lower entry prices with relatively stronger yields, which some experts say could position it for a rebound once investor sentiment improves. AMP chief economist Shane Oliver noted that Melbourne’s stronger population growth and lower price-to-income ratio could spark a recovery when confidence shifts.
National picture
Across the country, national dwelling values rose 4.1% over the year, delivering a 7.9% total return. Regional markets outperformed the combined capitals, with a 10.7% return compared with 7.0% for capital cities overall. Darwin was the outlier, leading the nation with 10.2% growth and a striking 17.6% total return.
Outlook for investors
Experts caution that investors should tailor their strategies to their priorities. Those chasing long-term capital growth may still favour Sydney, despite its stretched yields. Conversely, investors looking for stronger short- to medium-term income streams could find better opportunities in Brisbane, Perth, or Adelaide.
With high rents, limited housing supply, and steady migration continuing to drive demand, property investment remains a key wealth-building strategy for many Australians, though the choice of city depends heavily on whether yield or growth is the priority.
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