While property prices are expected to flatten out as the year progresses, the Canberra market remains solid – for now
Canberra is recording some of the highest property prices in the country and was one of the strongest markets in Australia as 2018 came to a close.
“It continues to see great price growth, and there’s good buyer and rental demand. For someone who really understands that market, Canberra is worth a look,” says Nerida Conisbee, chief economist at REA Group.
She does caution buyers to be mindful of land tax, however. This tax has driven potential buyers to areas just over the NSW border, such as the city of Queanbeyan. But buyers who have assessed and accept the Canberra land tax are spoilt for choice in terms of what they can buy.
“There’s an opportunity coming through Canberra in the improvement sector, whether it’s a renovation or adding value to a site through subdivision and gentrification,” says Damien Lee, head of acquisitions at Caifu Property.
“A lot of very good mixed-use developments go through here, too, with the retail injection, the cafe injection downstairs and nice apartments upstairs.”
In line with Sydney’s downslide, Lee does expect property values in Canberra to plateau. But with most other capital cities reporting a decline, a flat market remains a good market to be in.
“Over the September 2018 quarter, the prices for dwellings other than houses decreased in all capital cities except for Melbourne and Canberra,” Malcolm Gunning, the outgoing president of the Real Estate Institute of Australia, stated in a December 2018 media release.
Of all the states, the ACT also recorded the greatest increase in housing finance trends over October 2018, at 2.3%.
Rental conditions tighten
The positive performance of Canberra’s rental market is likely to attract interest from investors. “The median rent for three-bedroom and two-bedroom houses remained steady in Sydney, Perth and Canberra,” Gunning says.
“The markets of Sydney, Melbourne, Brisbane, Canberra and Hobart have vacancy rates below the 3% benchmark, indicating a strong demand for rental accommodation in these capital cities.”
Data and analysis from CoreLogic support this view, and the Hedonic Home Value Index in December 2018 noted that Canberra has the tightest rental market in Australia, with rental demand outstripping available supply. CoreLogic also highlights Canberra as having the second-strongest market conditions after Hobart.
SUBURB TO WATCH
HARRISON: Apartment activity on the up
The strength of the ACT can be observed in the Gungahlin suburb of Harrison, which has been recording consistent positive growth in recent years.
The unit market in particular saw an upswing. After reporting a slight decrease in December 2013, values rose by 14.8% in 2015. Over the 2017–18 period, prices continued to go up, increasing 3% to a median of just under $400,000.
Sellers are able to unload properties at a discount of only 3.9%. Rental yields are strong as well, with unit investors able to reap an average return of 5.7%. Tenants are paying an average rent of $420 per week following a remarkable boost of 13.5% in rental rates during the 12 months to October 2018.
Growth: The unit market has been recovering from negative growth, with prices on the rise since 2015
Yields: Rental returns are high in this suburb, at 4.2% and 5.7% for houses and units, respectively