The four yield numbers.
| Metric | Formula | Tells you |
|---|---|---|
| Gross yield | Annual rent / Purchase price | Almost nothing useful on its own. |
| Net yield | (Rent − holding costs) / Price | What the property earns before leverage or tax. |
| After-tax yield | (Rent − costs + refund) / Price | Your actual yield after NG refund. |
| IRR (10-year) | Rate zeroing NPV of cashflow + exit | The honest annualised return. |
Only one of these numbers reflects what actually matters to you as an investor: IRR. It accounts for the deposit you put in, the cash you topped up over the hold, the sale proceeds at exit (after CGT), and the time those cashflows happened. Gross yield ignores all of that.
2026 benchmarks by state — houses.
Typical gross yields by state capital houses, 2026 market pulse (benchmarks verified against independent sources):
| Capital | Gross yield (houses) | Typical net | 10y IRR range |
|---|---|---|---|
| Sydney | 2.4% – 3.2% | 1.0% – 1.8% | 6% – 11% |
| Melbourne | 2.8% – 3.6% | 1.3% – 2.0% | 5% – 10% |
| Brisbane | 3.8% – 4.8% | 2.2% – 3.1% | 7% – 12% |
| Perth | 4.2% – 5.4% | 2.6% – 3.6% | 8% – 14% |
| Adelaide | 3.6% – 4.6% | 2.0% – 2.9% | 7% – 11% |
| Hobart | 4.0% – 5.0% | 2.3% – 3.2% | 6% – 10% |
| Canberra | 3.2% – 4.2% | 1.6% – 2.4% | 6% – 9% |
| Darwin | 5.4% – 6.8% | 3.5% – 4.6% | 7% – 13% |
The inverse relationship is obvious: high-yield capitals (Darwin, Perth) tend to have lower or more volatile growth; low-yield capitals (Sydney, Melbourne) have stronger long-run growth. IRR range is similar — the trade-offs net out.
Sydney and Melbourne remain defensible despite low yields because leverage + growth dominate over 10 years. Perth and Brisbane are attractive now because yields + recent growth + affordability stack. Darwin is a volatility play, not a stability play.
Units vs houses.
Units run higher gross yields than houses — often 1.0-1.5 percentage points more. But unit net yields are usually worse because strata fees ($3,000-$10,000/yr), higher vacancy, and structural plateau in capital growth eat the headline.
| Market | Unit gross | Unit net (after strata) |
|---|---|---|
| Sydney inner | 3.6% – 4.4% | 1.2% – 2.2% |
| Melbourne inner | 4.2% – 5.4% | 1.8% – 2.8% |
| Brisbane | 5.0% – 6.2% | 2.8% – 4.0% |
| Perth | 5.6% – 7.0% | 3.4% – 4.6% |
For long-hold investors, houses with land almost always outperform units on 10-year IRR, because land appreciates and strata-fee drag compounds. Units make sense when: you need lower entry price (first investment), you’re buying for lifestyle (cashflow from holiday let), or you found a genuine land-value anomaly in the building.
Regional yields.
Regional Australia offers gross yields 1-3 points higher than capital city medians. Bendigo, Ballarat, Geelong, Newcastle, Wollongong, Toowoomba, Launceston run 4.5-6.5% gross on houses. Net yields hold up reasonably (lower strata, lower council rates on similar dollar basis).
The trade-off is growth volatility and liquidity. Regional markets move in waves — quiet for 5-7 years, then a single-year 20%+ move, then flat again. 10-year IRRs can be outstanding if you buy at the bottom of the wave, mediocre if you buy the top. Aggregator “hot suburb” lists typically announce the top of the wave.
Cashflow-first strategy (high yield, lower growth expectations) is the right fit for regional. Equity-first investors should stay in capital cities unless they have specific local knowledge.
What should your target IRR be?
Benchmarks, 10-year hold, leveraged 80% LVR, current rate environment:
- Under 6% IRR— worse than cash + shares after risk. Re-evaluate unless there’s a strategic reason to hold (PPOR-intent, family home, tax position elsewhere).
- 6-8% IRR — acceptable but not exciting. Matches diversified share index returns without the leverage-failure risk of concentrated property.
- 8-12% IRR — solid Australian property position. Clears alternatives after tax.
- 12-15% IRR — strong position. Requires above-average growth or above-average yield.
- Over 15% IRR— usually needs an assumption that isn’t repeatable (boom-year growth, below-market purchase, or underwriting errors). Stress-test with conservative scenarios.
Run your candidate through three scenario bands (conservative / base / stretch) and look for conservative ≥ 7%, base ≥ 9%. That’s a position you can hold through a full cycle without regret.
Run IRR on your candidate →
Our 10-year projector solves IRR from the actual cashflow vector including CGT at exit.
Open 10-year projectorThe mistakes in yield analysis.
- Using asking rent instead of achieved rent.Asking rents overstate reality by 5-15% depending on market. Treat the licensed “advertised asking” series as the ceiling, not the assumption.
- Ignoring vacancy. Even strong markets have 2-4 weeks of vacancy per tenure change. Model 2 vacancy weeks/yr as baseline; more in oversupplied unit markets.
- Underestimating holding costs. Council rates + water + insurance + strata + mgmt + repairs typically runs 25% of gross rent for houses, 35-45% for units. Use actuals, not optimism.
- Confusing gross yield with total return. A 4% gross house in Sydney historically outperformed a 6% gross regional on 10-year IRR because of growth and tax. Gross is just one input among five.
- Treating yield as static. Yields compress when prices rise faster than rents, expand when rents rise faster. Today’s 3.2% Sydney yield was 5% in 2012 on the same house. Model indexation, not fixed yield.
The short version.
Gross yield is marketing. Net yield is a sanity check. After-tax yield is a holding-cost input. IRR is the decision number.
Australian capital city houses run 2.5-5% gross depending on state; net is roughly half of gross; IRR over 10 years sits 6-12% depending on scenario. Regional and unit markets trade yield for growth volatility. Target conservative- case IRR ≥ 7%. Don’t buy headline gross; buy projected IRR.
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