Canberra sees a divided property market as units fall behind houses, even with strong population and economic growth
Canberra is a small city in comparison to juggernauts like Sydney and Melbourne, but that doesn’t mean it’s a small player in the property space. It has been playing catchup in recent years, spurred by the strong job market in the capital.
“Whilst Canberra’s population is relatively small, it’s growing at a rate of 1.8% – second only to Melbourne’s pace of population growth,” says Kate Forbes, national director of property strategy at Metropole Property Strategists.
“Combined with strong incomes and employment, population growth has been supportive of the recent capital growth Canberra has experienced,”
The property market has benefited significantly as a result of these economic and population boosts. However, the market isn’t reaping the rewards in a uniform way as “the growth has been quite polarised”. Forbes says, “with houses significantly outperforming units”. She believes increased land taxes have played a role in the current state of the market. “High land tax rates have dampened investor enthusiasm for ACT property as they eat into cash flows despite the rising rents. Investors already in the market there are seeking compensation for the higher land taxes,” Forbes says.
However, buyers need to look at a property’s growth potential rather than its price tag, she adds.
“Seek areas where the residents can afford to keep pushing the prices up, rather than areas where the property is affordable. Buy in the best possible location you can afford, as this is what will underpin your capital growth.”
Unit supply goes up
The limited demand for apartments could also be the result of the large supply of stock.
“Seventy-eight per cent of new dwelling approvals in Canberra over the last three years were for attached dwellings (apartments and townhouses),” reports Simon Pressley, managing director of Propertyology.
“The record high volume of supply has contained apartment value growth.”
Median unit prices have only increased by 6% since 2015, whereas median house values soared by 20% in comparison. The house market is likely what helps to maintain Canberra’s status as one of the most expensive cities in the country.
In CoreLogic’s May 2018 Property Pulse report, CoreLogic analyst Cameron Kusher notes that in Canberra only one suburb has a median house value under $500,000.
“This highlights the lack of affordable options in Canberra, despite the fact that it is one of the smallest capital cities.”
SUBURB TO WATCH
CONDER: Units record growth
One of only three suburbs in Canberra’s Lanyon Valley, Conder stretches from Tuggeranong Hill down to the valley, providing an amazing view. It is the commercial centre of Lanyon Valley and home to many of its amenities.
Lanyon Marketplace is situated here and caters to the shopping needs of both residents and visitors. There are several schools in the area, including Lanyon High School and Charles Conder Primary School. There is also a youth centre for after-school activities, as well as a childcare centre.
While both markets are performing admirably, units seem to be outdoing houses, with the former recording 5.9% growth in the 12 months to April 2018.
Growth: Units have seen stong growth of 5.9% overa 12-month period
Commercial: Conder is regarded as the commercial centre of Lanyon Valley
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