Canberra’s rising prices could be affecting affordability as low supply becomes every buyer’s worst enemy

Canberra’s house prices peaked over the March 2017 quarter, recording the highest growth rate of all Australian capital cities during that period.

“Canberra’s been a good performer; it’s had a couple of very good years, and it’s probably coming into its third strong year. There’s 3–6% year-on-year capital growth projected over the next three years,” says Paul Glossop, director of Pure Property Investment.

For Glossop, a decreasing rental yield will be the main problem for the property market since prices are continuing to rise. Supply has not been catching up with the high demand, causing values to skyrocket in areas like Gungahlin and Belconnen. Thus, the suburbs outside of these regions could offer more opportunity for investors at present.

“The average house price is between the $470,000 and $530,000 price point; when we look at that value price point, we can get higher yield as well as better opportunity for capital growth in Brisbane and potentially the Hobart market,” Glossop points out.

“I’d probably be going further out towards Queanbeyan and looking for value in that market. It’s only half an hour from the Canberra CBD, and if you need to follow affordability criteria there, you can still get freestanding brick houses around the $300,000–$350,000 price point with good finds and gross yields.”

Population growth

The affordability issue affects not only sales but rentals as well.

“A rental increase in the ACT really indicates that we need an increased supply of property to meet the investor market,” says Nick Georgalis, managing director of major developer Geocon.

“At the moment I think the supply is just OK, but when it’s just OK, it means in six months’ or a year’s time we’re going to get into a shortfall.

“It’s a very simple dynamic: if you increase demand it puts pressure on the supply, and the real solution is to increase the supply to meet the demand.”

Even though there’s quite a bit of apartment construction underway, these developments have already been sold. With the population expected to increase in the next three years, demand should rise by the same level in a city that already has one of the tightest vacancy rates in the country.

Auction market steadies

Following the slowing of the market over the holidays, auctions are coming back on track. The Canberra CBD, Belconnen, Woden Valley, Gungahlin, Weston Creek Valley and Gungahlin have recorded the highest regional clearance rates, according to the Domain Group.

 

SUBURB TO WATCH

LAWSON: Potential breakout star in Canberra

With the recent resurgence of the Belconnen region, the suburb of Lawson has been popping up as a potential breakout star in Canberra.

It recently joined the list of the top 10 highest-yield suburbs in the state, as units in the suburb are recording an average yield of nearly 6%. Thus, much of the demand could be coming from investors who wish to break into this market early.

Apartments are still priced under $500,000, which suggests it’s still a good time to buy. Lawson has a central location that benefits residents, since it is close to the major commercial centre of Belconnen and the schools and hospitals in Bruce. The Canberra CBD is also less than 20 minutes away by car.