Those considering investing in any form of property will continually see a couple of terms used to discuss the investments performance, namely; capital growth, investment return and gross rental yield.
Capital growth. The term capital growth is often used in real estate to describe the increase in the price or value of a property. For instance the median price of a 3 bedroom house in Coburg in the March quarter of this year was $629,000 and twelve months ago it was $625,000. Therefore the capital growth is the difference between the two, $629,000, divided by the earlier figure, $625,000, which equates to 0.64 per cent over a year. Capital growth is also known as capital appreciation.
Investment return. From a real estate perspective the term investment return is very similar to the capital growth figure. It is the percentage of change in value of the investment over a given period of time.
Gross rental yield. Gross rental yield is a term that is frequently used to compare the investment return on a property investment. To calculate the amount you divide the yearly rental income by the purchase price of the home. For instance the yearly rental income on a 3 bedroom house in Coburg is $21,580 and the median house price is $629,000 resulting in a gross rental yield of 3.43 per cent.
Investors who are looking for comparative data on the investment potential of different homes will find that the REIV is able to assist, just visit www.reiv.com.au to find out more.