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).
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.