The control of available supply is leading to increased rental growth in Canberra, one of Australia’s highest-yielding cities
Canberra is retaining its position as one of the most expensive capital cities in Australia: its median rent per week ($528) comes in just behind that of Sydney ($582). As of March 2018, the nation’s capital was the second-priciest rental market in the country.
According to CoreLogic, the strict regulation of new housing supply in Canberra is a factor that’s pushing this growth along, since the recently limited supply has pushed demand.
Propertyology research also indicates that, over the past 20 years, Canberra’s rental growth was the highest among all the capital cities.
“Canberra’s 169% increase in rents was higher than Sydney’s 155% and third-placed Hobart’s (153%),” reports Simon Pressley, managing director of Propertyology.
This is likely spurred by Canberra’s increase in population in the past couple of years – its 1.7% population growth has been the second highest in the country, only topped by Melbourne’s. Canberra’s house prices have, for the most part, risen steadily during this time; by contrast, a high supply of apartments is dampening the unit market.
With tax increases looming, some buyers could be hedging their bets, even with enticing high rents on offer.
“Increases to land tax and high council rates are reportedly leaving some Canberra investors disenchanted,” Pressley says.
However, with demand being matched by low supply, tenants may have limited choice of rentals, and this could hold investor attention.
“Vacancy rates are incredibly low as there are very high levels of demand for rentals, and this points to even higher rents going forward,” says Kate Forbes, national director of property strategy at Metropole Property Strategists.
While investors hesitate, CoreLogic data suggest that first home buyers have become more active in this capital. The number of finance commitments from this group increased by a whopping 177.7% in the year to February 2018. Moreover, the percentage of first home buyers making up the owner-occupier population hit 25.6% – the highest in nearly a decade.
Perhaps due to the high prices in the Canberra CBD, demand is also extending beyond the Canberra metro to satellite cities like Gungahlin, Tuggeranong and Belconnen, which are more affordable.
“Demand has been very strong for outer-northern suburbs as the ripple effect kicks in and families move there, choosing it over suburbs closer in, due to value for money,” Forbes says.
SUBURB TO WATCH
GORDON: Appartments show up houses
Gazetted in 1987, the suburb of Gordon has a strong focus on sports, naming its streets after sportspeople.
Surrounded by the neighbouring suburbs of Bonython, Conder and Banks, Gordon has easy access to amenities such as a marketplace, a high school and childcare. Within the suburb itself are a primary school, a neighbourhood oval, a district park and Point Hut pond.
Apartments outperformed houses in the year to March 2018, with prices increasing by 9.6% against 7.6% growth for houses. Units also offered a higher average rental return of 5.2%. Nonetheless, the rental rate for houses rose by 10% over the 12 months to January 2018.
Growth: Both houses and units in Gordon have recorded consistent growth since 2013
Location: Gordon is centrally located near suburbs that offer schooling and childcare