AUSTRALIAN CAPITAL TERRITORY
Job cuts stall ACT property market
Perhaps more than any other Australian state, the ACT’s property market is hinging on the impacts of the upcoming Federal Election.
A slashing of the resources of public sector departments and agencies continues to set the tone for ACT investors wary of further cutbacks.
According to APM senior economist Andrew Wilson, there are definitive signs that the ACT’s property market is stalling, particularly within Canberra. He says public sector job cuts of the past
12 months, coupled with the high market growth of 2012, have meant the industry is now effectively on hold.
“Canberra is unlike any other market due to the public service; there’s no real
ancillary industry. It’s a very tight market characterised by supply, and it’s very
tough for first home buyers because it has one of the country’s highest median entry points. [The market] has stalled, and it’s not good news going forward, with more job cuts expected,” he says.
With the Federal Government recently announcing that the $12bn budget deficit could be plugged through the proposed introduction of the Medicare levy, the potential for further job shedding is real, with job security the key impediment to market growth and overriding any positive factors, predominantly low interest rates. Earlier this year, the state’s unemployment rate hovered around the 5% mark, the highest it’s been for about seven years. It is typically around the 3% point.
“It’s a very compressed market. The sentiment among locals will be affected, should additional job shedding occur – if you haven’t got a job, what’s the point of low interest rates? All the other trends are pointing to the fact that over the last two quarters or so – and certainly now – Canberra has hit the wall,” says Wilson.
Over April, the Canberra median price hit $545,000. This represented a 0.9% quarterly decrease, although it was not much of a departure from the growth of the previous 12 months, which saw an increase of 0.8% to the median value of houses. The weekly median advertised rent was $510, a 4.9% gross rental yield.
Like houses, units lost ground over the quarter, dipping 3.3%. This took the 12-month growth rate to -1.2%, enabling the median unit price to hit $410,000. However, units remain a better prospect for cash flow, evidenced by a strong median rental yield of 5.5%. This makes Canberra units the best cash flow performers among all capital cities outside of Darwin.
This southern suburb of Canberra is attractive to a wide range of buyers, thanks to a diverse selection of housing that includes high-end properties and properties that appeal to first home buyers.
Properties are fairly affordable for Canberra and, when compared to nearby Calwell, prices on detached houses are a good $90,000 cheaper, making it entirely likely that Isabella Plains will become more popular as buyers start to notice this price difference.
Rental yields are fairly good for an area 20 to 25 minutes outside of the CBD, reflected in rental returns of 5% for houses and 6% for units. There’s also enough in the way of local amenities to support the high rents that characterise the area.
The Hyperdome shopping centre provides residents with everything they would want in terms of shops, restaurants and entertainment, and there is a fair selection of local schools.
The best opportunities for investors are normally around the flat northeastern section of the suburb, which starts around Abercorn and Werriwa Crescents. Any of the cul-de-sacs dotted around the main road, Ellerston Avenue, are also worth a look. Ellerston encircles most of the suburb and provides quick access to the shopping at Hyperdome.
Units and houses offer much the same prospect. There’s a slightly greater demand for houses, but they are more expensive, even though rents on houses and units are similar.
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