Can the ACT market be resuscitated?
Those who enjoy medical TV dramas will be familiar with doctors jolting a dying patient back to life with a defibrillator. But what does that have to do with the Canberra property market?
Well, like the doctor’s life-saving defibrillator, the release of this month’s Federal Budget could act as a regenerating force for the area’s property market, according to experts. In the meantime there seems to be mixed opinion as to whether to invest in the ACT market, or to wait.
According to RP Data senior research analyst Cameron Kusher, many potential buyers and vendors are in a state of flux, and who could blame them? With 12,500 proposed jobs cuts within the public sector, there is good reason to be wary.
But other experts believe the ACT has enough going for it that, regardless of the upcoming Federal Budget’s contents, the market will still offer investors a good bang for their buck.
For investors on the wary side, Kusher says until the budget is released and job cuts to the public sector are announced, the market will remain unsteady.
“Because the Federal Government flagged reductions in the size of the public sector but made no firm announcements, uncertainty has weighed quite heavily on the Canberra housing market. ... If job cuts aren’t overly severe we would expect there would be a level of pent-up demand in the market which may be unleashed over the second half of 2014. Until such time .... it is difficult to determine the likely market direction for Canberra.”
Then there is the other point of view. Real Estate Institute of ACT CEO RJ Bell says there is still a positive view to take of the current market, regardless of the impending budget release. “Irrespective of the government’s desire to continue reducing the public sector, more than 50 senior bureaucrats have been approved to be hired since October of last year, and a further 430 non-executive positions have also been approved. So, it all doesn’t seem to be heading for a serious crash in Canberra’s employment base,” he says.
He believes it is also important to consider the age of public sector workers in the area. “When looking at the age of public servants we find that, in 2012, 15%, or 11,400, of ACT-based employees were aged 55-plus and, if they follow history, a great number will retire taking redundancy packages and consulting a couple of days a week, providing a very good piggy bank. Hopefully they will consider investment properties in the area.”
There are two other things to bear in mind: affordability and popularity.
The ACT is at the top of Australia’s affordability index for housing, at 29.8%. This compares to about 36% for Sydney, 25.4% for WA and 28.4% for the NT. That means market activity for first home buyers and investors. For example, in Crace you can pick up a brand new four-bedroom, two bathroom home with two-car garage within 10 minutes’ drive from the CBD for $599,000. For investors the rental yield is about 4%, with 12-month growth of 6% and a vacancy rate of 0%.
And it seems Canberra is also a popular place to live. In a recent annual survey of 5,400 people across 10 cities, Canberra was ranked Australia’s most liveable city. It also took the silver gong for healthcare services, cleanliness, design, roads, and employment and economic opportunities.
SUBURB TO WATCH
Identified last year by RP Data’s Spring Buyer’s Guide as the ACT’s most affordable suburb, Charnwood continues to offer affordability and growth. Located 15km from the CBD, the suburb has a population of just over 3,000. Local agents believe it is a great area for first home buyers and investors.
“Charnwood has affordable housing because for a long time Charnwood used to be the furthest suburb in West Belconnen
, but that is no longer the case,” Rutherford Johnston
Properties principal Geraldine Rutherford explains.
“Generally speaking, the houses are not large; however, they are attractive for first home buyers and investors, especially in the lower parts of Charnwood.”
The current median price for a home is $388,000, with a gross rental yield of 5%. Statistics show the area is active, with a 60-day turnaround on advertised properties and 12-month growth of 5%. Average annual growth is 6.0%.
The least expensive listed property is a two-bedroom townhouse (under contract) with modern design and open-plan living priced from $305,000, while the most expensive is a two-storey, five-bedroom home priced at $720,000.
Most errands or social outings require a car, although there is public transport via bus.
“On the positive side, public transport is good, there are several government and private schools in the area, and the Charnwood shopping centre is very good,” Rutherford says.