The forgotten Territory
Often dismissed as an overpriced and oversupplied market with limited growth, Canberra could be the surprise outperformer in the next few years, according to an analyst
Canberra prices have been weak for the last couple of years, especially in the last half of 2014, so naturally it doesn’t feature highly on investors’ lists.
However, Linda Phillips, senior economist at Propell Ltd, is upbeat about the national capital’s prospects.
“We’re now seeing an inflection point, and prices have started increasing during 2015,” she says. “Canberra may be the surprise market for growth over the next few years.”
This comes as the tight restrictions on recruitment introduced by the federal government after the last election have been lifted.
“The Public Service Commission has passed responsibility over hiring of government staff back to individual departments and agencies, which marks an end to the severe cuts in the public service, down by 11,000 staff in the last year alone,” says Phillips.
“This means that Canberra may start to experience higher growth, sharing the wave that has swept Sydney and Melbourne. The starting point for Canberra house prices is already high, with a median price of $590,000, so we are unlikely to see double-digit growth, but it is quite possible that growth could exceed much of the rest of Australia.”
There are good reasons for investors to look at Canberra, especially if prices are going to rise, even modestly. The drivers of economic activity for the Territory are different to other markets, being influenced by political cycles and the stability of public sector employment, so it tends not to be correlated with the other eastern seaboard markets, which makes it attractive to investors. It is driven by the public service cycle and tends to be sheltered from downturns, which makes it a safer investment.
“With the threats to employment evaporating this year, it looks like an appropriate time for investors to consider the market,” says Phillips. “We are expecting growth in house prices to average 4% in the next year for Canberra, though newer properties, or those with redevelopment potential, may do better than average.”
The trough in demand that followed the last federal election is now evaporating as demand returns to the market.
House prices are increasing, though at a modest pace. The auction clearance rate has been above 80%, similar to Sydney’s. Houses are typically selling within a month of listing, and the number of total listings on the market has dropped by 14% compared to a year ago.
However, the apartment market remains weak due to the current oversupply. “There are completed apartments still on the market looking for buyers, so it is not an off-the-plan market at present. As such, prices are not expected to show any increase in the next year,” says Phillips.
Despite the overall slow growth levels last year, some markets have shown considerable growth in prices.
Casey, on the very northern fringe of the city, not only had the highest number of sales but the median price increased by 21% to $520,000. Franklin
, also to the north, was another strong market, with prices up 9%, while nearby Bonner saw prices fall 2.3%, reflecting patchy market conditions.
SUBURB TO WATCH
Lyneham: Perfect spot for professionals and students
Young professionals love the suburb of Lyneham in north Canberra, about 3km from the CBD. It is also the suburb of choice for many students, as it is only about 10 minutes from both the Australian National University and the University of Canberra. Both these demographics generally prefer units to houses, and in Lyneham units outnumber houses by 1,861 to 1,087.
Moreover, with a median household income of $1,643, Lyneham’s population is reasonably well off compared to the Australian median of just $1,234, according to the latest ABS census.
Lyneham is a sought-after suburb with buyers and renters, as shown by the fact that there’s just 0.66% of stock on the market and the vacancy rate is 2.1%, according to DSR Data. The average rental yield of 5.2% is solid, especially for the ACT.
There are a wide range of properties available, including everything from new townhouse developments to old heritage homes. There are also real suburban benefits here despite being so close to the city, with many of the streets being tree-lined with beautiful gardens.
Modern two-bedroom apartments on Mouat Street can be picked up for less than $400,000. They are close to restaurants, cafes, shops and sports facilities. Furthermore, beautiful two-bedroom townhouses on Archibald Street can be bought for less than $500,000.
Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker