Gross and net rental yield: how Queensland investors measure a return

In this article

Written by

Kooky

Builder of Shaka, the payment router that pays every agent their commission on closing date.

About Kooky and Shaka →

Every investment property is advertised with a number, or acquires one within minutes of an investor opening a spreadsheet: the yield. It is the rent expressed as a percentage of the price, and it lets a $500,000 unit in Townsville be compared with a $1.4 million house in Brisbane's western suburbs on one line.

It has become a more pointed number this winter. The Reserve Bank's cash rate has been 4.35 per cent since May, above the gross yield on a typical Brisbane home. And on 26 June the federal changes to negative gearing became law: from 1 July 2027, a rental loss on an established home bought after Budget night can no longer be set against the owner's wages. When a loss is harder to absorb, the question of whether the rent covers the costs moves to the front.

This guide explains what yield measures and how to work it out, in both its gross and net forms. It goes through the published figures for Queensland and why different sources disagree, the costs that turn a gross figure into a net one, a worked comparison of a house and a unit, the relationship between yield and the interest rate, and the things yield cannot tell an investor at all. The market figures come from Cotality and Domain, with their dates. The worked examples are invented and labelled as such. Nothing here is a recommendation to buy or avoid any kind of property.

Cotality home value index for June 2026, published 1 July 2026; Reserve Bank decision of 16 June 2026.

Gross yield is one division

Gross rental yield is a year's rent divided by the value of the property, written as a percentage. Cotality, whose monthly tables are the most widely quoted source, describes it as the annual rent as a share of the home's value, before any costs.

The sum is short. A property that rents for $600 a week brings in $31,200 over 52 weeks. If it is worth $780,000, the gross yield is $31,200 divided by $780,000, which is 4.0 per cent. Those figures are an illustration.

Two choices hide inside that sum, and they explain most disagreements about yield. The first is which rent: the rent actually being paid under the current lease, the rent the property is advertised at, or an estimate of what it could achieve. The second is which value: the price being asked, the price paid, or a current valuation. An agent's brochure may divide a hoped-for rent by a hoped-for price. An owner of ten years' standing may divide today's rent by the price paid in 2016 and arrive at a figure that says more about the past decade than about the property.

For comparing properties on sale today, the consistent choice is the rent a tenant is paying or would realistically pay, over the price a buyer would actually pay.

What the published yields say for Queensland

Published yields are averages across thousands of homes. They show where a market sits, not what any one property returns.

Cotality's home value index for June, published on 1 July, put the gross yield at 3.3 per cent for Greater Brisbane dwellings and 4.1 per cent for regional Queensland, both unchanged from May. The May tables split Brisbane by property type: 3.1 per cent for houses and 3.9 per cent for units. Cotality's quarterly rental review, published on 9 July, adds the other capitals.

The pattern in the table is the general one: the dearer the homes, the lower the yield. Darwin yields the most. Sydney and Brisbane, the two dearest by Cotality's median values, yield the least. Brisbane's median dwelling value was $1,118,306 in the June index, second only to Sydney's.

Within Queensland the same rule holds. Regional homes, with a median value of $855,835, yield more than Brisbane's. Units, at a Brisbane median of $885,132, yield more than houses at $1,225,350. Rents do differ between these groups, but by much less than prices do, and a smaller price under a similar rent is a higher yield.

Why two sources give two yields

It is tempting to check a published yield by dividing a published rent by a published price. The result rarely matches, and seeing why is a useful lesson in what the figures are.

Cotality's rental review gives Brisbane's median dwelling rent as $734 a week for the June quarter. Over a year that is $38,168. Divided by the median dwelling value of $1,118,306, it gives 3.4 per cent, not the 3.3 per cent Cotality publishes. The gap is small, but it is there, because the median rent and the median value are the middle points of two different sets of homes. The homes available to rent in a quarter are not the same mix as the whole housing stock that the value figure describes. A yield calculated property by property and then summarised will not equal one median divided by another.

Change the source and the gap widens. Domain's rental report of 8 July put Brisbane's median asking rent at $700 a week for houses and $660 for units. Those are advertised rents for homes on the market in the quarter, a different thing again from Cotality's estimate across all dwellings. Cotality's own March quarter review had Brisbane houses at $745 and units at $656.

None of these is wrong. Each answers a slightly different question. The practical rule is to compare like with like: one source, one method, one date. A yield from one company should not be set against a yield from another to conclude that a market has moved.

From gross to net: the costs that come out

A gross yield treats every dollar of rent as the owner's. A net yield takes out the costs of holding and letting the property first. It is the annual rent, less annual expenses, divided by the value.

There is no single official list of what to subtract, which is one reason net yields are seldom published. The costs a Queensland owner would ordinarily count are these:

• council rates and utility charges that the owner pays;
• body corporate contributions, for a unit or townhouse in a community titles scheme;
• building or landlord insurance;
• the property manager's fees, including letting fees when a tenant changes;
• repairs and maintenance;
• land tax, where the owner's total landholding is large enough to attract it;
• an allowance for the weeks the property is empty between tenants.

Two things are deliberately left off. Loan interest is not part of net yield. Yield measures what the property earns, whoever owns it and however it is paid for; interest is a cost of the owner's financing, and is brought in at a later step. Depreciation is left off as well. It is a tax deduction, not a payment, and belongs in a tax calculation.

Some of these costs have rules worth knowing. Body corporate contributions are set each year by a vote of the owners on two budgets, and the Queensland Government's guidance allows a scheme to offer a discount of up to 20 per cent for payment by the due date and to charge penalty interest of up to 2.5 per cent a month on late payment. The levy an investor actually pays in a year therefore depends partly on paying on time.

The vacancy allowance is the one cost that is a guess. In a tight market it is small. Mortgage Professional Australia reported on 27 June that Domain's latest rental report put Brisbane's vacancy rate at 0.6 per cent. A property can still sit empty for a fortnight between tenancies while it is cleaned and advertised, and an owner who assumes 52 weeks of rent every year is assuming something that does not usually happen.

A worked comparison of a house and a unit

The example below uses invented figures for two properties. The unit's rent is set at Domain's reported median asking rent for Brisbane units, $660 a week, purely to anchor it; every other number is an assumption. Agent's fees are taken as 8 per cent of rent and vacancy as two weeks a year.

On gross yield the unit is clearly ahead, 4.77 per cent against 4.16. On net yield the order reverses: 2.96 per cent for the house, 2.83 for the unit. The body corporate contributions account for it. They are a cost the house does not have, and at $6,500 they are almost half the unit's total.

The example is not a finding that houses beat units. Change the levies to $3,500, as a small block with no lift or pool might charge, and the unit's net yield rises to 3.24 per cent and it leads again. The finding is narrower and more useful: gross yield flatters property with high running costs, and the ranking of two properties can change once costs are counted. In each case costs took between 1.2 and 1.9 percentage points off the gross figure.

Yield on the price, or on the money actually outlaid

The price is not all a buyer pays. Transfer duty, legal or conveyancing fees and the cost of inspections and searches are paid on top, and they earn no rent.

The Australian Taxation Office's guidance for buyers of rental property treats these as part of acquiring the asset. Stamp duty and the legal fees on the purchase cannot be claimed against rent; they may be included in the property's cost base for capital gains tax. For yield, the equivalent step is to add them to the price.

Suppose, as an illustration, that the buyer of the $720,000 unit above pays $40,000 in duty and other purchase costs. The outlay is $760,000. The net income of $20,350 is then 2.68 per cent of what was actually spent, against 2.83 per cent of the price alone. The difference is modest in one year and permanent: the purchase costs are never recovered from the tenant.

The same logic applies to work done before the first tenant moves in. Money spent bringing a property up to a lettable standard is part of what the investment cost.

Yield against the cost of borrowing

Net yield says what the property earns. Whether the owner is in front each year depends on what the money cost.

Take the invented unit again, and assume the buyer borrows 80 per cent of the price, $576,000, on an interest-only loan at 6.0 per cent. Interest is $34,560 a year. The property's net income is $20,350. The owner must find the difference, $14,210 a year, or about $273 a week, from other income. On these assumptions the interest alone exceeds the entire gross rent.

That is the ordinary position of a new investor in Brisbane at present, and the published figures show why. With gross yields of 3.1 to 3.9 per cent and a cash rate of 4.35 per cent, before any lender's margin, rent does not cover interest on a large loan. It did not need a tax change to make that true.

What the law that received assent on 26 June changes is what happens to the shortfall at tax time. Under the present rules, the loss on a rental is set against the owner's other income. From 1 July 2027, the Budget papers say, a loss on an established property bought after Budget night can be deducted only against rental income, with the remainder carried forward. Properties held before Budget night, and new builds, keep the existing treatment.

For buyers of established homes, then, a shortfall will from next July be carried in full, year by year, until the property turns a profit or is sold. That does not change how yield is calculated. It changes how much weight the result carries. The yield at which rent covers interest and costs, on the deposit a buyer can put in, becomes the figure that decides whether the property pays its own way.

Why yields fall when prices rise

A yield is a fraction, and it moves when either part moves. Over the past year in Brisbane, the bottom of the fraction has grown much faster than the top.

Cotality's May index had Brisbane dwelling values 19.1 per cent higher than a year earlier. Its June quarter rental review shows the city's median rent up $47 a week over a year, to $734, which is about 6.8 per cent. If a property's value rises 19.1 per cent while its rent rises 6.8 per cent, a gross yield that began at 3.7 per cent ends at 3.3 per cent. The owner is not worse off; the property is worth far more and the rent is higher. But a new buyer at the new price starts with the lower yield.

This is why falling yields are usually a sign of a strong market for owners and a harder one for buyers, and why the highest yields are found where prices have grown least. It also works in reverse. If values ease while rents keep rising, yields recover without any change in the homes themselves.

What yield does not measure

Yield is half of an investment's return at most. The other half is the change in the property's value, which yield ignores. A house yielding 3 per cent in a suburb where values rise 7 per cent a year has returned more than a unit yielding 5 per cent where values are flat. The difficulty is that the rent is known and the growth is a forecast.

Yield also says nothing about risk. A high yield often reflects something buyers are wary of: a town that depends on one industry, a small or unusual dwelling that few lenders will finance, a building with problems, or a market with many similar properties for rent. The price is low for a reason, and a low price under an ordinary rent produces a high yield.

It is a snapshot. Rent can be reviewed, tenants leave, levies rise after an annual general meeting, and a special levy can remove a year's net income at once. A yield calculated on the day of purchase describes that day.

And it is not a tax calculation. The owner's income tax rate, the depreciation available on a new building and the treatment of any loss all change the after-tax result, and they differ from one owner to the next.

Using yield to compare two properties

Used carefully, yield is still the best single screening number an investor has. The method that survives all the cautions above has three parts.

For a unit, the second step means reading the body corporate's budgets and its sinking fund forecast, since this year's levy is no guarantee of next year's. For a house, it means an honest figure for maintenance, which the owner bears alone. For either, the rent should be tested against what comparable homes nearby are actually leasing for, not against the figure on the brochure.

A gross yield tells an investor how a property is priced against its rent. Only the net figure, set beside the cost of the loan, says whether it pays its way.

Kooky, from Shaka

Kooky edits Queensland Estate and builds Shaka, the payment router he made for Queensland property professionals. One payment comes in, and every agent, agency and party in the deal receives their signed share on closing date.

About Kooky and Shaka →