Rental yield

Rental yield is a return metric, not a price metric. It lets an owner or a prospective buyer compare how hard a property works as an income asset, independent of how much its price might rise or fall over time. Gross yield is the simpler, more commonly quoted figure, annual rent divided by price or current valuation, expressed as a percentage.

Net yield takes gross yield and subtracts the actual running costs of holding the property as a rental, property tax at the non owner occupier rate, MCST maintenance fees for a condo, agent commission on tenancy renewals, minor repairs, and vacancy periods between tenants. Because these costs vary a lot by property type and tenure, two properties with the same gross yield can have quite different net yields, which is why net yield is the more meaningful figure for genuinely comparing income return, even though gross yield is the number most often advertised.

Buyers commonly compare gross yields across very different property types, an HDB flat versus a condo versus a landed home, without adjusting for how different the cost structures are, particularly MCST fees on a condo, which can eat a meaningful chunk of gross yield that an HDB flat simply does not carry. Rental yield is also sometimes treated as the whole investment case on its own, when it says nothing about capital appreciation, financing cost, or how a property might perform if bought with leverage, a high yield and a poor overall return can coexist.

Before comparing any two properties, check whether a quoted yield is gross or net, use current market rent for the specific unit type and area rather than an asking rent taken from a listing, and work out the realistic running costs for that specific property, its actual MCST fee, its actual property tax band, rather than borrowing a rule of thumb from a different property type.

As an illustrative example, a condo advertised with a gross yield of around 3 percent might fall closer to 2 percent once MCST fees, property tax and a realistic vacancy allowance are subtracted, while an HDB flat advertised at a similar gross yield might retain more of that figure as net yield simply because it carries no MCST fee. This gap is exactly why comparing yields across property types on the gross figure alone can be misleading, and why asking specifically for the net figure, or working it out independently, matters before drawing any conclusion about which property is the stronger income asset.

Winfred Quek is an Associate Marketing Consultant at Crestbrick Pte Ltd (CEA Licence No. L31010886H). CEA R073319H. This page is for general information only and does not constitute financial, investment, or legal advice. Verify current figures with IRAS, HDB, CPF Board, or MAS before making any decision.