Parents whose children are heading interstate to university in Canberra are facing an anxious time as the rental affordability crisis is set to worsen as the capital experiences its annual mass entrance of students, defence personnel and contractors.
The crisis has been so severe that in the past few years students have been forced to sleep in cars and tents because they can’t find housing when the semester starts.
In addition to the extraordinary low vacancy rates (1.7 per cent in November 2019 and likely to decrease this month), Canberra also has the highest median rent in the country.
Rents have grown over 3 per cent per annum in Canberra, compared to 1 per cent in other capitals. Hannah Gill, Managing Director of Property Management at Independent, has seen the situation play out in real-time.
“Canberra attracts a lot of people who come here to work but who are based elsewhere. From January onwards, the rental market becomes incredibly tight. Students looking for somewhere to live are competing with public servants, defence personnel and contractors, all of whom have high incomes and stable jobs. We can have over 50 applicants for a single listing. Unfortunately, the stark reality is that it can be incredibly challenging to get your foot in the door,” Hannah says.
Micaela found herself stuck between a rock and a hard place when she moved to Canberra to study Medical Science at the University of Canberra.
“I started out trying to rent,” she says, “but it was tough to find a place. After couch surfing for a while, I ended up moving in with my boyfriend even though we were really too young for that step. If I’m honest, the decision was driven by needing a place to live.”
When Micaela told her parents her woes, they hit on a novel solution: “I wanted to move out. They were looking at buying an investment property. It seemed like the obvious solution.”
Micaela’s parents purchased a new off-plan apartment for her to live in along with a housemate. Both tenants pay rent to Micaela’s parents, although they charge their daughter less than they could get on the open market. “I study full-time, and this is their way of supporting me,” she acknowledges.
“It feels so much better knowing that I have a stable place to live,” says Micaela. “It’s almost impossible to concentrate on your studies when you’re worrying about where you’ll live next month. My friends have commented on how much happier and more relaxed I am this year, and my marks have definitely gone up.”
John Minns, Managing Director at Independent, says that conditions in Canberra are ideal for landlords.
“Canberra is the perfect place to consider a property investment. For a start, the same low vacancy rate that makes things tough for students makes life easy for landlords. Once your student graduates and moves out, you’ll find it very easy to lease the apartment to someone else. Landlords in Canberra can really take their pick of great tenants, with little to no lost income between tenancies.
“It’s also a very safe investment, with a strong history of stability and annual growth in property prices. We’re one of only two capitals where homes still increased in value during 2019 when everyone else was having a downturn.”
Canberra has the highest median income in Australia. The combination of high salaries and high demand for rental properties mean that you can command healthy rental returns across the board.
“There’s a diversity of property opportunities in Canberra,” says John. “It’s such a tight market for tenants that you can rent out almost any property. Key locations like the inner suburbs are highly desirable, but it doesn’t have to be the CBD. As long as there’s a shopping centre and transit hub nearby, it’ll get snapped up.”
The popular Ivy development in Woden is a good example. It’s a 15-20 minute drive to the ANU and University of Canberra, and walking distance from the bus interchange. It has plenty of facilities that are bound to appeal, including a complex swimming pool and state-of-the-art weights and cardio gyms. It can be easy for busy university students to neglect their health, so this makes it easier to maintain a healthy lifestyle without costly membership fees.
Financially, too, conditions are about as good as it gets.
“Banks are lending out money at rate of 3 per cent or lower,” says John. “Compare that to rental returns of 5 to 6 per cent and you can see why people are investing in Canberra property.”
If you’re buying for your student, you’ll want to keep a few things in mind.
“Low maintenance is important,” says Hannah. “No matter how responsible your student is, they probably don’t want to spend a tonne of time maintaining a garden. For easy upkeep, focus on properties with an easy to clean interior and hard-wearing finishes.”
Location is also key. Look for somewhere with great public transport links to the university campuses to save your child money on the upkeep of a car.
Size depends on your preference. There are plenty of desirable one-bedroom apartments in Canberra, and they’re very easy to rent out once your student has moved on. From your child’s perspective, though, a two-bedroom might be better. They can find a friend to split the rent and utilities with and be company for one another in their new city.
You might choose to buy a bigger property, give one room to your child and rent out the others yourself. That way you can ask for market rent for the other rooms even if you want to support your student and meet more of your own overheads.
The Ridge in Watson is an ideal candidate if you go this way. It has accessible transport to the Australian National University and is close to both University of Canberra, Australian Catholic University and Academy of Interactive Entertainment. With a range of three and four-bedroom townhouses on offer, it’s ideal for students who have friends or classmates also looking for somewhere to rent. The size gives them a broader appeal in case you decide to rent to families or couples once your student has graduated.
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