Price-to-Rent Ratio

The price-to-rent (P/R) ratio is a property's price divided by its annual rental income. It's the mathematical inverse of gross rental yield, and it's useful for the same reasons gross yield is: a quick comparability check across markets.

A P/R ratio of 20 means the property costs 20 years of rent. Historically, ratios above 25 indicate renting is significantly cheaper than buying (in a purely cashflow sense); below 15 suggests buying outperforms renting quickly. These are rough heuristics, not rules; they ignore capital growth, transaction costs, and tax treatment.

In Australia in 2026, P/R ratios vary dramatically by suburb. Premium Sydney and Melbourne postcodes often show ratios above 35 (reflecting gross yields below 3%). Regional Queensland and Tasmania regularly show ratios under 18 (gross yields above 5.5%). The gap between markets is wider than in most developed countries.

Price-to-rent is particularly useful for investors comparing across geographies, where local incomes, rents, and prices can be misleading in absolute terms but comparable in ratio form.