Despite the looming federal election, the property market in Canberra continues to notch up steady gains
Federal elections can be destabilising to any market, particularly to the national capital, where a change in fortune can have a huge impact on the workforce and the resulting demand for housing. However, there’s no sign that property investors in Canberra are worrying about the potential implications of the election results on housing.
The housing markets continue to march upwards, raking in 9.45% median house value growth to $501,500, just a shade lower than its long-term annual growth of 10.74%. Units are also performing quite well, adding a healthy 7.84% over the same period to $394,000.
Rental yields are also holding strong at 4.68% for houses and 5.30% for units, thanks to an ultra-low vacancy rate of just 0.9%. Canberra is one of the only two cities in Australia (the other one being Darwin) to achieve both high rental yield and strong capital growth.
“Canberra has been another fantastic performer,” says Tim Lawless, research director with rpdata.com. “Last year we saw values up nearly 15% in the ACT, and it’s still the strongest yielding market as well. It has provided investors with both capital growth and yields. When you look at housing supply in the ACT, it’s very tight, particularly the units. Units seem to be ‘the’ market in the ACT; that’s where investors should look into.”
Canberra also has the second lowest unemployment rate at 3.7%, with the highest wage levels. “These two factors make the Canberra market an ideal investment, combined with low vacancy, high rent prices and a steady-as-she-goes market that rarely has any major economic fluctuations. The large government workforces are also another bonus. This consistency, however, decreases the further you get out of the general city and fringe areas, so some caution still needs to be taken,” says the Propell Valuers Market Report.
Strong population growth to further squeeze supply
Canberra’s population grew by an estimated 5,900 people or 1.7% in the 12 months to 30 June, according to the Australian Bureau of Statistics. This takes the overall population to 352,200 persons.
Amaroo in the northern part of Canberra recorded the highest population growth of 600 persons, while Franklin and Harrison saw large increases of 560 and 530 people, respectively.
While building approvals rose more than 20% to 1,036 in the December quarter, it’s still well below the underlying demand, according to the Propell report.
“A continuation of supply problems plague the ACT and the land is slow to be released which is leading to a reduction in rental properties. New laws affecting dual occupancy developments are also keeping some investors from creating duplex sites in infill blocks,” it says.
This resulting squeeze on rental supply will push Canberra’s already high median house price and rent even higher. However, the strong wages growth and low unemployment will ensure demand will be consistent.
“Growth was experienced mainly on the fringe areas for houses and close to the CBD for units, and it is expected that the middle-ring suburbs will be the growth areas for both property types during 2010, as well priced, quality product is sought out by investors and upgraders,” the report says.