Markets15 August 20235 min read
August 2023: rents up 25% since the start of the pandemic
Capital-city rents had risen approximately 25% since March 2020. The cumulative compounding rental yield repriced the entire investor proposition.
The yield reset
A new-build IP yielding 4.0% gross in 2020 was yielding 5.0–5.3% gross by August 2023 against an unchanged purchase price — without any capital growth. Investor maths now stacked at 6.0% mortgage rates in a way it didn't in 2020 at 2.5%.
The retail confusion
Sky News viewers kept asking how investors could possibly buy with rates this high. The answer was rental yield: the 2020 thesis was capital-growth-led, the 2023 thesis was income-led, and the income side had repriced upward by 25%.
Dax Stanley
Founder & Principal Strategist, Hera Property. #1 international bestselling author of Real Estate Investing Using ChatGPT.