Strong recent capital growth and excellent yields are attracting investors to Canberra’s outer suburbs, where relatively low purchase prices and high-quality amenities and services are driving the market forward.
A stronger return of 5–6% can be found in the newer suburbs of Gungahlin and Woden Weston, reports Herron Todd White, as well as in Macgregor, a suburb that provides affordable modern dwellings priced at around $400,000 to $600,000.
However, demand for general investment “has tightened due to the slowed market conditions of Canberra”, says Herron Todd White in its November 2015 Month in Review.
“Potential investors or opportunistic builders and developers are actively looking for the right block with the appropriate zoning to possibly develop … but the current lease variation charges that developers must take on has been the biggest obstacle in investment and development,” it reports.
The new housing developments that are moving ahead “generally leads to a ripple effect within the suburb, as values could increase due to the increased activity stimulation these potential blocks attract”, Herron Todd White adds. “This has not come into full effect, but we see that this trend is on the cusp of occurring.”
Meanwhile, consumer and industry confidence in ACT real estate overall is officially on the rise, with the ANZ/ Property Council of Australia Survey for the December 2015 quarter showing an increased score of 135 points. This is an increase of four points on the September quarter and eight points on this time last year; a score of 100 is considered neutral.
“The survey finds more positivity around forward work expectations and staffing levels and the industry is clearly readying its workforce for when the jobs land,” says the Property Council’s ACT executive director, Catherine Carter.
There is work in the pipeline, including the Denman Prospect, West Belconnen and eventually along
Northbourne Avenue, which should underpin growth in jobs and generate economic activity.
But Carter says some of the upswing in outlook “can be attributed to our highly experienced local industry picking up significant jobs interstate”.
“However, it doesn’t fully reflect the state of the local market, which remains subdued.”
Carter says confidence in the ACT Government remains in negative territory, and there is a consensus that “the industry faces a few more tough years ahead”.
“Given the lack of Commonwealth investment, now is the right time for us to focus on urban regeneration, and some local companies are already positioning themselves in preparation for large-scale urban renewal,” she says.
SUBURB TO WATCH
Bruce: Student demand puts rentals in top spot
Located within the popular Belconnen district northwest of Canberra, Bruce is a prominent suburb 9km from Canberra’s CBD, featuring family homes of different sizes and styles and pockets of high-density apartment blocks and townhouses.
Enveloping a business hub dominated by the University of Canberra, the Australian Institute of Sport and the Canberra Institute of Technology, Bruce is home to thousands of students, ensuring ongoing rental demand. And its recent price growth has seen developers scrambling to meet the needs of the influx of renters.
Real estate agent Peter Norton-Baker from Century 21 Capital in Forrest says that while Bruce’s growth over the past 12 months has been admirable, the new apartment developments haven’t had a positive impact, evidenced by a flatlined unit value in the past year. This is despite the fact that the average age of Bruce’s residents is 26, and half its population attend one of Bruce’s many educational institutes.
“It’s firm for houses but not so good for apartments. There’s a glut of apartments,” confirms Norton-Baker. That said, he believes the market will be strong in 2016. Bruce’s top-billing homes have a price tag of $1.5m, while at the entry-level end properties are priced from the low $300,000s.
