Canberra property presents a compelling investment case that’s unlikely to slow down

Dr Andrew Wilson 9 August 2021 30
Apartments and townhouses

My Housing Market’s inaugural Canberra Housing Investor Report has painted a compelling investment profile for Canberra. Photo: Michelle Kroll.

The ACT has firmed as a leading Australian investment prospect over the last 12 months, with the latest data confirming champion status of the Canberra housing market, for both owner-occupiers and investors.

July’s figures again revealed Canberra at the top of the pile for most key capital city housing market performance indicators, inclusive of both houses and units.

My Housing Market’s inaugural Canberra Housing Investor Report paints a particularly compelling investment profile with Canberra the leading capital city across a number of key factors.

As a property economist, I am always more persuaded to opportunities driven by data rather than hype or sentiment. It is why the recent Canberra market performance is set to grab the attention of an increasing number of savvy investors.

One of the primary reasons investors will be looking more closely at Canberra apartments is because of the low-entry points compared to Sydney.

While Canberra’s apartments have increased by 10.6 per cent this year, they still remain, on average, almost $350,000 lower than Sydney unit prices. For many investors, $350,000 will present a significant challenge entering the market, much less building and sustaining a portfolio.

We all know entering the market is only half the battle. What is equally important for investors, in particular, is the ability to sustain a loan and see returns, through either yield or capital growth.

The city’s rents remain the highest of any market nationwide, for both houses ($650) and units ($540). Since Christmas, landlords have enjoyed an increase of 16.1 per cent for house rents in the ACT while unit rents are also up strongly by 8 per cent.

Despite recent boomtime results in Canberra, relatively low purchase prices continue to elevate local gross annual investment yields as capital city leaders, with houses at 3.4 per cent and units at 5.5 per cent. These numbers are well ahead of Sydney at 2.0 per cent and 2.8 per cent, respectively.

These numbers can also make it cheaper to buy than rent in Canberra.

This is being driven by an underlying shortage of rental accommodation, with the latest data revealing a monthly vacancy rate of just 0.7 per cent for houses and 1.5 per cent for units.

Put simply, the Canberra market will require more stock in town centres to see relief for renters in both apartments and houses. While renters struggle to find stock, buyers are also finding the market incredibly competitive. Canberra has led Australia in auction clearance rates in both June (87.4 per cent) and July (87.3 per cent).

Dr Andrew Wilson

Dr Andrew Wilson: Canberra is an attractive investment destination for multiple reasons. Photo: Supplied.

Canberra now has the second-highest capital city median house price at $981,684 – behind only Sydney and with an annual increase of 19.9 per cent. While apartments have seen some growth in Canberra at 10.6 per cent, they are still significantly more affordable generally than buying like-for-like in Sydney.

The July data combined presents Canberra clearly as a national leader on overall housing market performance.

Canberra’s boomtime prices growth and nation-leading gross investment yields have resulted in current strong annual total investment returns of 23.34 per cent for houses and 16.1 per cent for units.

Complementing the housing data is the continuation of a strong economy in the national capital. Canberra’s unemployment rate remains the second-lowest of all the capitals at 4.9 per cent (July 2021) after Melbourne, down from 3.8 per cent during the height of the pandemic (May 2020). National unemployment sits at the same figure of 4.9 per cent.

The outlook for the Canberra housing market clearly remains positive with prices and rents for both houses and units set to continue to increase over the remainder of 2021 and into 2022. A record annual result for prices growth for both houses and units is a clear prospect for the local market this year.

Continuing low-interest rates, a strong and strengthening economy, shortages of vacant rental properties with sharply increasing rents and sky-high confidence will continue to attract all buyer types to the Canberra housing market. It’s why an increasing number of investors are re-engaging with housing markets.

Dr Andrew Wilson is Chief Economist for My Housing Market. Dr Wilson is one of Australia’s highest-profile property market commentators appearing regularly on TV and radio, in print and online media.

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30 Responses to Canberra property presents a compelling investment case that’s unlikely to slow down
hming sanga hming sanga 9:26 am 22 Aug 21

All types of accommodation should be for living, not for making money! We should make money from innovation and creativity. Let’s stop following failed capitalist states like the US.

jorie1 jorie1 7:59 pm 17 Aug 21

All sounds good in theory, but I worry that all these new property investors may not be aware of the socialist rental laws which are now in place in the ACT. The new rental laws are very prohibitive and do not allow landlords to increase the rent to market value (can only increase rent by the Canberra CPI each year, which last year was only 1%) and once you have a tenant, they are there unless they choose to leave (and why would they leave as they are paying low rent, while the market rent goes up around them). Landlords are very limited in the ACT for what they are allowed do with their own property, and they can only evict if they are selling or renovating (or getting family members into the house). Plus the ACT government charges very high land taxes and rates which are increasing exorbitantly every year (and the landlord is not allowed to increase the rent to meet these expenses). I would not recommend buying an investment property in Canberra, unless you enjoy subsidising tenants (who are paying low rent that cannot be increased) while you get charged thousands by the ACT government each year. The only winners are the ACT government who see landlords as a cash cow and charge landlords tens of thousands of dollars every year. No wonder landlords in Canberra are selling up and buying in other States. Take a look at the situation in California and you will see exactly where the ACT rental market is heading…

rossau rossau 12:28 am 15 Aug 21

Dr Wilson, was your major in Unethics?
The gay abandon with which investors put citizens to work for them is one of the forks of the rapacious growth economy. It’s a Ponzi scheme and ought to be recognised as such. Unfortunately, the governments are beneficiaries also. There’ll be much pain for short-term gain.
Welcome to modern serfdom.

Loviatar Loviatar 4:44 pm 12 Aug 21

Meanwhile those of us looking to actually buy a house to live in are out of luck because the market it dominated by investors with ready capital. Unless I want to live 30 minutes out from the city and 45+ minutes away from family and friends, I’d be looking at $750K or more to even have a tiny yard.

Ian Gay Ian Gay 5:06 pm 09 Aug 21

"Enthusiasm" yeah, that's DEFINITELY what everyone is calling it. I know plenty of people looking or buying this past year, most are still looking, and they are just overflowing with "enthusiasm".

cockneyreject cockneyreject 3:42 pm 09 Aug 21

I’m not sure this is good news for those who want a home to live in ( as opposed to a second or third one to invest in).

Jeff Smith Jeff Smith 10:28 am 09 Aug 21

The increase in Unit values certainly isn't happening on those small 1 and 2 beddies that have been built by the big Canberra apartment developers in the last few years. Most of them continue to sell for slightly less than they were bought for. Even the new off the plan prices are the same as they have been for the last few years. The prices of houses and rents in Canberra show we need more housing land supply.

Oiledpengu Oiledpengu 8:50 am 09 Aug 21

I rent a new public housing 4 bed in Gunghalin for $70 per week. Just get on the public housing waiting list. The government recently announced more stock to come on line. Get in whilst you can before the rush.

    rossau rossau 12:36 am 15 Aug 21

    I rent a tidy old 3 bed in Weston for $500 per week.
    I’m a single father on a reasonable income so can’t -don’t want to- access public housing. I bet your disposable income is higher than mine.
    My landlord is land-taxed to support your housing and that cost flows through to me, all because the ACT government’s chief interest is this Ponzi scheme in housing.
    Such disparities are shocking.
    If the land can’t be productive, don’t invest in this modern serfdom.

Hobbra Visuals Hobbra Visuals 7:02 am 09 Aug 21

This market is going to crash like we've never seen once interest rates go back up. Imagine being stuck with this mortgage once it goes back to the value.. People who go beyond will realise this once interest goes up...

    Geoffrey Bell Geoffrey Bell 9:47 am 09 Aug 21

    Hobbra Visuals Banks general only loan you an amount that you can afford to pay back that covers any increase of rates by a few percent. So going to be a long time for this crash to happen.

Karen Feng Karen Feng 6:12 am 09 Aug 21

if buyers have to buy at a higher price than then they will need to charge more rent.

I'm worry about those doing it tough

    Geoffrey Bell Geoffrey Bell 9:37 am 09 Aug 21

    Karen Feng Your local Labor/Greens government sets the rules for property investors. They dictate if we have a glut of rentals for people to pick from. Or we had long ques of people fighting over a rental. Investor takes a very large RISK when they get in debt with a bank. And after these new changes that the greens want to bring in i expect less rentals to pick from and large increase in rents. A lot of investors i think would have sold up and run for the door. Why not take the cash and pay down debt or invest in other assets

Matthew Beale Matthew Beale 8:55 pm 08 Aug 21

There are still a few, not many, affordable locations in Canberr for those just starting out.

While they are quite south or west, they give a window of opportunity to some.

In Canberra terms, Conder, Banks and Lanyon are quite far away. But from a major city point of view, a 30 minute drive to the city is pretty decent.

But I agree it can be quite hard given how much people need to save, even for basic homes.

Monica Tiffen Monica Tiffen 8:09 pm 08 Aug 21

I feel incredibly SAD for all those great young people wanting to get married, and have a Home and Family of their own!!! How on Earth could they afford such a Normal way of life!!!

    Geoffrey Bell Geoffrey Bell 8:43 pm 08 Aug 21

    Monica Tiffen I can't work out how a married couple with two wages can't get into the property market.

    Simon Mitchell Simon Mitchell 9:04 pm 08 Aug 21

    Geoffrey Bell it’s a hell of a lot harder than when I bought my first house in Canberra in 1994.

    A few hot tips - a lot of young folks these days don’t have ready access to careers.

    How easy is it to get a long if you are in the gig economy? How hard is it to even rent if you are in the gig economy.

    Monica Tiffen Monica Tiffen 9:04 pm 08 Aug 21

    Have you seen the prices??

    Geoffrey Bell Geoffrey Bell 10:17 pm 08 Aug 21

    Read what i posted - Married couple on two wages. I never said a thing about gig economy or renting or back in 1994. Do you disagree with me or not. That two people on wages should be able to save and get a house in this day and age?

    Simon Mitchell Simon Mitchell 11:29 pm 08 Aug 21

    Geoffrey Bell yes, I read what you posted. They should be able to, but how long will that take, and is that reasonable, considering that historically it’s taken less time for people to do so.

Kate Tricks Kate Tricks 6:12 pm 08 Aug 21

Impossible to buy now

    Simon Mitchell Simon Mitchell 7:05 pm 08 Aug 21

    Kate Tricks yep.

    House prices increasing like this should be a source of extreme shame for those managing the economy, for many, many reasons.

    Houses are for living in, not investing in.

    Claire Cat Claire Cat 7:17 pm 08 Aug 21

    Simon Mitchell please may I screenshot your words and share?

    Simon Mitchell Simon Mitchell 8:35 pm 08 Aug 21

    Claire Cat feel free to just copy and paste. I’m just a washed up old financial planner 🙂

    Claire Cat Claire Cat 8:37 pm 08 Aug 21

    Simon Mitchell your word's resonated with my feelings and expressed them (minus the swear words) perfectly.

    Thank you 😊

Sam Oak Sam Oak 4:26 pm 08 Aug 21

This is welcome news. Landlords in Canberra face the highest land taxes and rates in the country it is good to see we are starting to see the rewards of taking such a big financial risk. Bought multiple houses here over the past 10 years and my friends in Sydney thought I’d lost it. Many years I could only sit and watch Sydney prices go up and up but this year has been good to say the least for those that remained patient all these years!

    Capital Retro Capital Retro 11:27 am 09 Aug 21

    Sam, your patience is commendable but you now have to decide to convert your paper profit into hard cash or risk losing everything. Read up on what happened after previous situations like we are having now.

    Sam Oak Sam Oak 12:23 pm 09 Aug 21

    Lol paper money is worthless, the government is printing billions of dollars every single day and handing it out like candy. Ever heard of jobkeeper and disaster payments? This is money handed out for free just to save people’s jobs. Do you know where this money went? Straight into the property and share market! I have houses in Turner I bought 10 years ago for 1m worth over 2m now. The rent I’m charging has gone up increasing my rental yield. Nah.. don’t think I’ll be losing anything! What “previous situations” should I be looking at? When I bought for a property for $500k during the GFC and sold it for $900k 3 years later? I’m so frightened!

    Capital Retro Capital Retro 2:22 pm 09 Aug 21

    By any chance, is your real name Gordon Gekko?

    rossau rossau 12:37 am 15 Aug 21

    Just how many of your multiple houses do you need?
    Find a conscience or a faith and stop riding the backs of the working class.

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