For those seeking strong rental returns, remote Australian towns are gaining attention, but the risks must be considered. In areas where job markets shift with mining cycles and housing supply is limited, rental yields are approaching 10%. These returns, however, come with exposure to unpredictable changes in property values and limited prospects for long-term capital growth.
Currently, regional hotspots and smaller suburbs outside the capital cities are leading in rental yield performance. According to recent data, mining towns such as Kambalda West in Western Australia offer yields as high as 9.4% per year. Nearby Somerville records a yield of 8.81%, which is higher than any capital city suburb including Darwin’s highest-performing area. This trend is driven by a combination of low property prices and high, rising rents caused by undersupply and demand from key industries.
Strong yields can appeal to income-focused investors, but they often reflect underlying issues. In places like Karratha, rents have jumped between 100% and 118% over five years, making housing unaffordable for some residents. Past data shows that property values in these locations can decline rapidly following growth periods. For instance, Karratha’s median house price fell from $800,000 to $300,000 within five years after a boom period.
Among capital cities, Darwin stands out for offering high yields due to constant worker turnover and relatively steady rental demand. Investors are favouring units over houses, as they usually have lower purchase prices while still benefiting from rental growth. In fact, units in nine of the ten highest-yielding capital city suburbs are outperforming houses, despite slowing rental growth in most major cities.
Overall, the trend reveals a clear trade-off. High yields are often accompanied by greater risk and limited potential for long-term value increases. More stable markets such as inner Melbourne or Sydney tend to deliver slower yet more consistent returns. That said, Darwin and Brisbane have remained exceptions, where both houses and units continue to record rent increases.
Rental growth is slowing in most capital cities. House rents have remained unchanged for over a year, while unit rents are rising at their slowest rate since 2021. As property prices begin to rise again, available rental yields may decline, making it more difficult for investors to depend solely on rental income.
Choosing between capital growth and strong yield comes down to investment goals and risk tolerance. While high returns in certain areas may seem appealing, investors need to assess local rental demand, future housing supply, and how easy it will be to attract and retain tenants.
