A city facing up to its demons
Canberra’s economy is going through testing times, but investors should not dismiss this market as somewhere that can’t offer capital growth
The latest RP Data CoreLogic Home Value Index results don’t make for riveting reading for those who have owned investment properties in Canberra over the past year.
They show that dwelling values in Canberra have increased by just 1.7% over the past 12 months, compared to the roaring 14.3% growth that Sydney has experienced over the same time. They were even a long way off the next weakest performer, Hobart, at 4.6%.
And in an area that’s closely tied to the public service, the talk of more potential cuts has not helped property prices. The Australian Public Service Statistical Bulletin shows that almost 8,000 jobs were lost over 12 months, as the APS was shrunk from 167,051 to 159,126.
However, the minister assisting the prime minister for the public service, Senator Eric Abetz, says more than half of the job losses (53.5%) were actually due to natural attrition, as opposed to redundancies.
“The Australian Public Service will reduce by 16,500 staff across the four years to 2016–17,” says Abetz.
This figure includes the loss of 14,500 jobs that was proposed under the previous government.
But the combination of declining revenue and increases in spending has left some commentators predicting that further cuts could be on the way.
“It might even intensify given the failure of some of the budget cutbacks to get through the senate,” says Shane Oliver, chief economist at AMP Capital. “The government may at some point be forced to undertake more public service cutbacks, like maybe in the May budget next year.”
Additionally, in a sign of waning confidence, ACT retailers experienced the second largest slump in trade in Australia over August.
Reasons for optimism
However, early signs in spring are that the Canberra market will improve as agents are reporting increased sales activity, according to the Herron Todd White report.
“The activity is expected to continue until the end of the year when Canberra generally becomes quiet over the Christmas and New Year period,” says the report.
For investors seeking capital growth over the longer term, it may be worth checking out the central suburbs of Canberra City, Braddon
, Turner, Kingston, Barton and Forrest.
Above-average unit stock there includes two bedroom, two-bathroom modern accommodation with prices ranging between $500,000 and $600,000 plus.
However, investors should keep in mind that the rental returns on standard residential properties may not be as positive as the returns available in the medium-density housing and unit markets.
Meanwhile, families looking for more space are targeting four-bedroom dwellings in the districts of Woden, Weston
Creek and Belconnen
, where prices generally sit between $550,000 and $650,000.
SUBURB TO WATCH
Kambah: High-growth, high-yield suburb
Kambah may have been one of The Punch’s
top 10 bogan suburbs in Australia in 2009, but it is has plenty to offer people other than bogans. For one, it is the biggest suburb in the ACT, with an area of 1,130 hectares and a population of 15,447. Consequently, it has a wide range of schools, parks and shopping centres that make this suburb popular with families.
And despite being 14km from the Canberra CBD, it is very close to the Tuggeranong and Woden town centres, which also have excellent amenities.
The typical gross rental yield for units in Kambah is a healthy 5%. Furthermore, the fact that many units can be bought for well under $400,000 is very appealing for investors not looking to risk a lot of money in the ACT market. Prices there have grown by 4% over the last 12 months, but investors who are willing to buy and hold for the long term could see good capital growth once Canberra recovers from the cuts to the public service.
Properties on Studley Street are in a quiet location near Murrumbidgee golf course and are close to schools, shops, public transport and arterial routes. There are also nice two-bedroom, one-bathroom townhouses available on Pinkerton Circuit and Ashby Circuit for less than $300,000. Streets that are not in high demand include Seymour Place and McTaggart Crescent.