Melbourne's one-bedroom apartment market has the highest rental yield in the state, new analysis from the Real Estate Institute of Victoria has revealed.

The data showed the market had a yield of 6.7 per cent, making it the most profitable for investors.

REIV President Robyn Waters said positive results for inner-city suburbs such as Melbourne, Southbank, South Yarra and Dockland were largely due to their appeal to CBD workers, higher education students and their families, as well as retirees, all of whom value proximity to the CBD.

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REIV President Robyn Waters

“Considering that you only need to outlay $347,500 to buy a one-bedroom apartment in the city, it is a great market for people to dip their toe into property investment and be confident of a tidy return of around $450 a week," she said.

"Given recent interest rate cuts, APRA guidance to loosen lending standards and the result of the Federal Election which has delivered stability, the REIV is starting to see an upturn in investor activity which is likely to continue as we approach the spring selling season.” 

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Source: REIV

There was also a prevalence of regional Victorian towns on the high rental yield list, with three-bedroom houses in Moe generating a 6.6 per cent return and three-bedroom houses in Stawell returning 6.4 per cent.

Ms Waters said the strong performance of regional towns was likely a product of low rental vacancy rates.

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402/340 Russell Street, Melbourne. Available for $440,000 through Tim Brown of Castran Gilbert. As seen on The Home Page.

"Demand for rental properties is at an all-time high and there is simply not enough stock on the market to meet demand in many areas," she said.

"For example, the rental vacancy rate for the Latrobe Valley – South and West Gippsland is sitting at 1.3 per cent which could go some way to explaining high rental yields for many towns in the area in our analysis."

Rental yield is a measure of how much income an asset produces each year as a percentage of that asset’s value. 

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