Demand for detached housing could spur price growth in the capital, even though an oversupply of apartments is expected
Canberra may be a strong investment location if you’re looking for ongoing growth potential over the next three years.
BIS Oxford Economics’ Residential Property Prospects 2017 to 2020 report notes that the population of the ACT is increasing, and the house market is currently in undersupply after roughly 1,000 houses containing asbestos were taken off the market.
This ensures that competition in the property market is hot, even if unit stock flowing onto the market is expected to be high. The ability of residents to earn high salaries in Canberra should also sustain the value growth of houses.
“Canberra has the highest incomes of the capital cities and affordability is not as strained as in the other cities,” comments Angie Zigomanis, senior manager at BIS Oxford Economics.
“Further upside is expected in house prices. Recent net interstate migration outflows are now a net inflow, while solid net overseas migration inflows have emerged largely due to the recovery in overseas student growth that has coincided with the lower Australian dollar.”
The median house price is expected to continue increasing throughout 2017 and 2018. However, with apartment construction activity reaching record levels, the eventual release of supply could slow down the progress of the overall market and seep into the housing market. Nonetheless, the Canberra market recorded a fairly low vacancy rate of 2.2% as of December 2016, suggesting that demand could be enough to sustain it through the slow period.
Economic storm may approach
Gungahlin and Belconnen, two of Canberra’s top-performing regions, boast housing markets that are performing well, as the unit market anticipates an influx of stock.
Metropole Property Strategists CEO Michael Yardney agrees that Canberra has been a strong performer over the past year and remains on track to be a star in the national property market, even with slowed growth. Over the past nine years, Canberra has seen dwelling values increase by 35%.
“It is the only housing market, other than our two big capital cities, where the cumulative capital gain has been greater than 30% post-GFC,” he says.
However, Philippe Brach, CEO of Multifocus Properties & Finance, calls for caution.
“Canberra has changed their policies and they’re looking at decentralising a lot of the government departments,” he explains.
With departments being spread out across the country to states like Victoria, this could affect employment opportunities.
“I think investors are being cautious about Canberra,” he says.
SUBURB TO WATCH
THEODORE: House market gains momentum in Canberra suburb
The suburb of Theodore, 24km south of Canberra, has been riding the capital’s high, with property values increasing all across the board.
The median house value is nearing the $550,000 mark following 6.6% price growth. Units remain highly affordable at $369,041– the low growth of 1.7% suggests that many residents are still getting used to the idea of apartment living. However, this mindset may be changing – with the rental yield for units at a high 5.1%, investors could definitely be looking to popularise such a lifestyle.
Theodore is bordered by Monaro Highway, making road travel convenient. It is also very close to natural attractions like Tuggeranong Hill and Canberra Nature Park.
