While Melbourne continues to hog the limelight, properties in Canberra are quietly enjoying a solid and steady growth.
House prices in the nation’s capital continue to grow solidly despite predictions of job cuts in the public sector. During the three months to April, median house values rose by 3.67% to $512,500. On a year-on-year basis, the median house price rose by 11.69%.
Units outperformed all other capital cities in Australia during the April quarter. Median unit values rocketed by 6.55% to $412,000.
Michael Wellsmore, president of the Real Estate Institute of the ACT, believes growth prospects in the city will continue to be strong. “Growth is predicted to remain strong for the foreseeable future as the supply issue is not being adequately addressed as yet,” he explains.
Matthew Bell, Australian Property Monitors economist, adds that Canberra is yet to experience some of the highest growth in the country this year. “Given the strength of the overall economic recovery, and the fact that rental growth has been below trend for both houses and units for the last few years in Canberra, I think that we’ll see relatively strong growth in Canberra by the end of 2010,” he says.
While there has been a noticeable increase in stock available in the market, Stephen Bunday, franchise co-owner of LJ Hooker Dickson, says they were nowhere close to normal levels and are unlikely to drag prices down. “The numbers have gradually crept up but we’re still below what I’d call normal. We’ve seen multiple owners and investors making the decision to put their properties on the market because they’re guessing it’s the peak,” Bunday explains.
Investment returns in Canberra are currently among the highest in Australia with houses and units achieving 4.58% and 5.19% median rental rates, respectively.
Vacancy rates have fallen further to just 0.5% in April according to SQM Research.
Short-term rental in high demand
High incomes combined with a significant transient population in the territory have created an ideal environment for investors who want to capitalise on low vacancy rates and high yields.
“Because of the transient population and the number of people on contract work or commuting, the short-term fully-furnished rental market has proven to be really strong,” says Bunday. “For a capital outlay of around $10,000, you can rent out a fully-furnished apartment which will give you an extra $100- plus a week in rent and also give a depreciation schedule to your furniture,” says Bunday, who reveals that Braddon, Reid, Turner, Barton and Kingston are good performers for the fully-furnished market.
Bunday also suggests that investors look into the student market. “Students were traditionally thought of as fodder for the lower end of the rental market, but the influx of cashed-up international students who are only staying for a few years can provide really good opportunities,” he says.
A large number of enrolled students and limited accommodation options are creating hot spots around universities, says Wellsmore. “The whole market is doing well; however, if you’re prepared to accept groups, areas near major universities are performing well.”
Canberra currently has the fourth highest median house price in the country. However, low priced entry into the property market is still an option for investors. Bunday suggests Narrabundah as a solid suburb for investors looking to purchase around the prestigious inner south. “It’s a bottom end suburb in the inner south, which carries suburbs like Forest, Yarralumla, Deakin and Griffith. Entry levels to those suburbs are quite high, but Narrabundah has a real mix of housing, including units and old cottages on large blocks which are still relatively accessible,” explains Bunday.
Houses are performing quite well in the area, growing by an impressive 16.86% over the last 12 months to April 2010, according to Residex. The three months to April have also recorded stable growth with house prices improving by 5.14%. The median house price for Narrabundah now rests at $655,000 and attracts a median rent rate of 4.34%.
Investors should, however, be cautious when buying older properties. According to Herron Todd White’s Month in Review report for May, while the inner south is an appealing location that is close to parks, the CBD and popular shopping precincts in Manuka and Kingston, age can be a determining factor. “Due to the age of the dwellings in the area, an investor should be wary of the condition of the particular dwelling as unforeseen costs could become a deal-breaker,” it says.