• Some investors are seeing massive returns in many of Australia’s capital cities as rent increases to record levels.
• Darwin in particular has seen investor returns up 16.1% compared to this time last year.
• Following a dip in activity last year, investors have returned to the property market in the first half of 2021.
• Visit Business Insider Australia’s homepage for more stories.

Investors are making huge returns in some parts of Australia as the rental market outpaces property sales.

New Domain data shows rental properties in capital cities outside of Sydney and Melbourne generated massive profits over the last year.

Darwin in particular delivered yields of 7.4% to owners, the highest ever for any capital city in Australia, up 16.1% from this time last year.

More broadly, the report found average rents grew to record levels over the June quarter, with the increases most acutely seen in Canberra, now the most expensive city to rent a house with an average asking price of $630 a week.

Rents in Darwin have leapt more than 20% from June 2020 levels to $593 per week, with Brisbane and Perth just behind at an average of $450 a week.

Nicola Powell, Domain chief of research and economics, said the data showed rents for Darwin units were increasing at a faster rate pace than sales prices, a result that was a combination of pandemic-driven migration to the city and remote work.

“There’s a strong demand for rentals there as the city’s attracting a lot of people who see it being a safe place through COVID-19 and who are moving there, especially with being able to work remotely,” Powell said.

While Darwin stood out, most capital cities outside of Sydney and Melbourne provided strong returns to owners in the rental market.

Peth houses delivered a yield of 5.11% in June of this year, up 9.6% from 2020. Despite yields falling slightly in Hobart, Brisbane and Canberra, investors still saw strong returns of 4.6%, 4.58% and 4.14% respectively.

Following a dip in activity last year, investors have returned to the property market in the first six months of 2021.

Australian Bureau of Statistics (ABS) lending indicators figures show loan commitment values for investors rose in May to their highest level since mid-2015.

Katherine Keenan, ABS head of finance and wealth said the agency had seen investor loan commitments soar by 116% compared to May last year.

“The value of new loan commitments for investor housing rose 13.3% [over the month] to $9.1 billion…which was the highest level since June 2015,” Keenan said.

Haynes Wileman, a real estate agent with Phillips Pantzer Donnelley in Sydney, told Business Insider Australia slowly-rising apartment prices, generally more popular with investors, signalled their return to the market.

Wileman also said the collapse of the Airbnb markes during Australia’s first lockdown in March last year also impacted investor activity.

“A lot of properties that were on the Airbnb market came onto the rental market and flooded that market at the time,” he said, noting they have mostly reverted back “which has tightened up the general rental market”.

“We’ve seen off the back of that, with good rental returns coupled with the cash rate being at such a low point, that we’re able to get a lot of investors interested,” Wileman said.

Powell said the report’s analysis signalled where investors could see the strongest returns in Australian capital cities, but suggested this might change over the next year.

“Investors are now a growing market segment,” Powell said. “A lot of them are now looking for cash flow, so they will be very interested in yields.”

“I think a lot of them are now seeing value in Darwin and Perth, but it’ll be interesting to see if the high yields continue after the pandemic.”

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