Canberra set for growth in 2010
The Canberra market won't be sleepy for long, as undersupply puts renewed pressure on rents and prices.
It hasn't been a spectacular 12 months for the Canberra property market. Unit prices have risen faster than house prices, but overall growth is sluggish, in spite of everything the nation's capital has going for it.
The ACT has definitely not been hit as hard by the global financial crisis as, say, WA, NSW or Queensland. Nevertheless, investors have been taking a wait-and-see approach, causing the market to slow right down. The underlying fundamentals, however, are still solid, and Paul Powderly, state chief executive - ACT for Colliers International, predicts that by early 2010, the picture will be different. "The outlook for us is steady as it goes for the next six months, but some improvement fairly early next year in terms of price increases," he says.
The stability of government employment and a relatively high median income are the main drivers of capital growth in Canberra, and Powderly notes that the latest federal budget showed continuing strong Commonwealth investment in public sector jobs. "We think that will counter private sector contraction. [Government employment] will probably remain reasonably stable. If anything, it might be up just a little bit," he says.
The other factor that is certain to push prices back up before long is Canberra's lack of supply. Units in the most desirable locations - the inner south and inner north - are scarce and snapped up as soon as they come onto the market. There are not as many cranes on the skyline these days as banks have tightened their lending criteria for developers. This inevitably results in increased pressure on both prices and rents.
"It's the inner-city suburbs where supply is most constrained because of the availability of land," notes Powderly. "That parliamentary triangle is still the prime area for investors because there's almost zero vacancy."
If it's a premium unit you're after, keep your eye on the suburbs of Turner, O'Connor, Braddon and Reid in the inner north, and Deakin, Forrest, Kingston and Griffith in the inner south. If, on the other hand, you'd prefer a less-expensive unit or a standalone house, there are investment opportunities coming up in the Gungahlin region, 15 minutes north of the city.
Gungahlin is largely an owner-occupier market, however Defence Housing Australia is due to market a number of properties in the area, all with long-term leases. "As long as they're at attractive yields, investors are getting the best of both worlds - secure tenure and buying at prices that are a little bit more subdued than they have been in the last two years," says Powderly.
The area for investors to avoid at the moment is the Belconnen region, northwest of the city. There are two large unit construction projects kicking off in the next two months that will soak up most of the demand in the area. Belconnen will probably see the weakest capital growth of any ACT region throughout 2009-10, but with the Belconnen Town Centre in the midst of a $124m upgrade, due to be completed by the end of 2010, there could be surge in demand in 2011.
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