While Everyone Watches Auctions, Yields Just Did Something They Haven’t Done Since 2019

Gross rental yields across Australia have climbed to 3.85%, according to Cotality’s October Housing Chart Pack, the highest national level since August 2019. It arrived in the same month the auction market took over the headlines, and it has barely rated a mention.

Fewer than half the homes taken to auction in the capital cities have been selling, and each weekend’s result has been reported as a fresh verdict on the market. A clearance rate is an indicator. It measures the share of homes offered at auction on a given weekend that sold, and it is driven largely by Sydney and Melbourne, where auctions are the main way homes change hands. Brisbane’s 21.2% result in early October was its lowest since 2008, and it came from 138 auctions in a city where most property sells privately. On its own, the number tells you how one group of buyers and sellers behaved on one Saturday. It says very little about how a well-chosen investment property will perform over the next ten years.

That gap between a statistic and its meaning is where most investment mistakes begin. When we don’t have a truth we can hold onto, we keep trusting anyway, and we trust whatever is closest to hand. Most of that trust is automatic. You get in your car each morning confident the brakes will work, without giving the engineering a second thought. Then you hear a few people talking about brake failures, and suddenly every stop feels uncertain, even though their cars were a completely different make and model. Property headlines work the same way. A weak weekend of auctions in Sydney or Melbourne can rattle an investor whose property sits in an entirely different market. When the facts aren’t clear, the gap fills with fear, opinion and whichever argument is loudest. 

Arguments can stand in for truth for a long time, and perception often wins over reality. Decisions built on perception tend to be the ones people regret. Mal Cayley applies a well worn, two-rule test to every investment decision.

Rule one: don’t fool yourself.
Rule two: you’re the easiest person to fool. When we don’t understand what’s happening around us, fear does the fooling, and we end up convinced of a reality we’ve built for ourselves.

Migration is the clearest example. One of the loudest arguments in the housing debate is that cutting immigration would fix the shortage. The evidence in The Clarity Report points the other way. In 2020-21, net overseas migration ran at a loss of 88,800 people, the first negative year since 1946. Supply did not rebound, and prices rose at their fastest pace in decades. National dwelling completions then fell to 174,752 in 2024-25, close to a decade low, through a period of record price and rent growth. A functioning housing system absorbs population growth. Australia’s was already failing to turn approvals into finished homes before the borders reopened, and Cotality now estimates the country will need around 1.4 million additional homes by 2035.

The economic pressures are real. The cost of living is rising, the Reserve Bank has lifted the cash rate four times this year to 4.60%, and Cotality estimates those rises have cut the borrowing capacity of a median-income household by around $90,000. Those are facts. The challenge is working out what they mean.

For property investors, part of the answer is sitting in the rental market. Yield is the relationship between annual rent and value, so it moves whenever either side moves. Through 2023 and 2024 the national figure sat around 3.7%, bottoming at 3.56% in December as values ran ahead of rents. Since then values have eased while rents have kept rising, up 5.5% over the year to September. Rental growth is slowing and the national vacancy rate has lifted from 1.5% in February to 2.0%, yet that is still well below the pre-COVID decade average of 3.3%. Cotality attributes the slowdown to renters reaching the limits of what they can afford rather than any meaningful increase in rental supply. The people who would have bought this spring and now can’t still need somewhere to live.

A national number is still only a starting point. Cotality notes that in the larger capitals, gross yields remain well below what most investors need for neutral cash flow. Over the September quarter, regional values fell 1.9% compared with 4.3% across the combined capitals, and over the year regional values are still 5.6% higher while capital city values are down 1.8%. The facts that matter are the ones about a specific property in a specific market.

You can make money in any market if you know what you’re doing. It takes three things: the facts, the opportunity, and the capacity to act on both. Capacity takes several forms: time, knowledge, the right lending structure or the right people around you. Today’s climate offers real opportunities to those who have all three. Capital city vendors are discounting by a median of 4.4%, the most in five years, and with borrowing capacity down there are fewer buyers competing for the same stock. That creates room to buy well, build equity and generate cash flow, provided the property is chosen on its fundamentals. The useful questions are practical ones. Does the rent comfortably support the holding costs at today’s rates, with a buffer for another rise or two? Is rental demand in this location driven by population, jobs and limited supply? How would this asset perform if values moved sideways for three years?

Few investors answer those questions alone, and the most successful rarely try. Often the strongest move is partnering with people who do this every day and can show you what the numbers mean for your situation.

September quarter inflation data landed on Wednesday, and it ran hot. Headline inflation reached 4.3% over the year to September, up from 4.0%, and the trimmed mean the Reserve Bank watches most closely rose to 3.7%, above both market forecasts and the RBA’s own August projection. Market pricing for a fifth rise on Melbourne Cup Day jumped from around 60% to above 80% on the day, and all four major banks now expect it. Whatever the outcome, it will shape the headlines for the rest of the year. It won’t change how many homes Australia has built, or how many people need one.

Your Next Step

Facts are only useful once you know what they mean for you. If your strategy was set when rates were lower or values were climbing, now is a good time to check that your portfolio still works on today’s numbers, and to see whether current conditions open an opportunity you’ve been waiting for. Book a time with your Investor Property property coach to review your plan and map out the next move towards your own goals.