ACT Excerpt from the 2011 February Market Report

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The ACT’s bucking the price growth trend – could it be the next Darwin?

The spring has not been full of good news for property markets around Australia. Cities around the country have remained relatively flat, with some limited median price increases, whereas regional properties have suffered across the board.

If there’s one pinprick of shining light, however, it’s in the ACT. RP Data named Canberra as its top performer in its September figures, with the city showing overall quarterly growth of 1.9% (the only city to go above 1%) and median house price growth of 1.8%.

Why is the national capital bucking the trend? Well, it all comes back to supply and demand. Canberra’s undersupply issues continue unabated: indeed, land releases earlier this year saw prospective buyers camping out in order to secure the few blocks that have been released. Additionally, price growth is also being turbocharged by the city’s affluent population.

“Canberra is actually the most affordable city in Australia,” says Michael Wellsmore, president of the ACT’s real estate association. “Yes, prices are high in comparison to other states; however, so is income. The median family income for the ACT is $135,200 pa, compared to the national average of around $75,000. The percentage of income needed to service the average mortgage is lower than the national average at 18%, compared to around 30%.”

That’s good news for investors sitting on some of the few pieces of real estate in the country to be showing impressive growth – but less so if you’re on the bottom rung of the ladder – or an investor on a limited budget.

Government options

The long-term outlook could be problematic: Darwin faced similar supply issues, and while it was Australia’s star performer for several years, the market eventually slowed to a more or less complete stop.

The government appears to be acutely aware of the issues, judging by the number of schemes Wellsmore lists as having been put in place to promote affordable property.

“The government has its own program of affordable housing within the subdivisions it’s involved in, and in other subdivisions it requires that at least 3% of stock goes towards affordable housing,” says Wellsmore. “Another innovation is a ‘land rent’ scheme. Rather than buying the land outright, you rent it from the government and then just pay the cost of constructing the property. You can eventually buy the land down the track, of course, but this is a good way to get people going.”

Even so, it looks like new land releases will be few and far between over the next few years – which will be music to the ears of investors.

The undersupply issues will also mean that pressure will remain on the rental market, which is likely to produce strong rental yields and an ongoing low vacancy rate – currently around1% across the city.

Areas highlighted by Wellsmore as star performers include the city’s inner north and south areas, as well as properties around the town centres of Belconnen, Tuggeranong and Gungahlin. However, he emphasises that it’s more important than ever to buy well, and seek properties that are of good value.

 

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