THE trendy Sydney harbourside suburb of Rushcutters Bay has the highest residential yield in the country, bucking the typical pattern where units on the city's outskirts have the best rental rates of return.

The result comes as agents report residential property buyers are looking more closely at rental yields than ever before after recent comments from Reserve Bank governor Glenn Stevens that, despite some housing supply issues, house prices in Australia are higher than they should be.

Located just 2.9km from the central business district of the country's largest city, units in Rushcutters Bay sell on average for $343,384 and have a residential yield of 7.3 per cent, according to research compiled for The Australian by RP Data.

Caroline Leong, 30, recently purchased a one-bedroom 100sqm unit in the suburb for between $450,000 and $500,000, with the hope of eventually renting the property out for more than $500 a week and buying another home to live in.

"I like the eastern suburbs and Rushcutters Bay was the nicest and most affordable of those areas," she said.

The research by RP Data looked at the best yields for units and houses throughout Australia that were 15km from one of the country's major cities and fell within a price range of $300,000 to $1 million.

Kingston Beach in Hobart, Tuart Hill in Perth and Darlington in Sydney all topped the list for houses with the best yields.

Melbourne's Middle Park and Sydney's inner western suburbs such as Ashfield and Summer Hill had the country's worst yields for units.

Angus Raine, chief executive of Raine & Horne, said he believed there was a current trend where people were shying away from buying on the grounds of how much capital gain they would get for their property in the future and they were instead opting to focus on rental returns.

"Appreciation should be about 10 per cent a year and in seven to 10 years you should double your money," Mr Raine said.

Meanwhile, demand from first-home buyers, eager to capitalise on the federal government's first-home buyers grant before it is halved to $7000 after September 30, continued to support the market at the weekend.

In Sydney, 73 per cent of properties auctioned were sold, up from a clearance rate of 46 per cent a year earlier. Of homes auctioned in Melbourne, 73 per cent were sold, up from 52 per cent the same weekend last year.

By the end of July more than 137,000 people had taken up the first-home owners grant since it was boosted to $14,000 and $21,000 (for new homes) last October as part of the federal government's stimulus package.

The take-up of the grant peaked at 20,389 in June but fell last month to 18,939.