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Units development pipeline key to rental vacancy relief

John Thistleton 14 January 2019 14

Could a development pipeline be the answer to rising rent prices in the ACT?

A development pipeline of 21,000 units should ease Canberra’s tight rental vacancy, which has pushed rental prices to the highest in the country.

Colliers International ACT chief executive Paul Powderly expects 4000 to 5000 apartments to be developed annually in the foreseeable future. This should ease vacancies to a more healthy 3 to 4 percent, proving better supply-demand dynamics.

In the December quarter, Canberra’s median weekly house rents climbed 1.8 per cent to $560, outstripping $540 median rents in Sydney, and other capital city markets.

“Unit prices will stay where they are because too much supply and competition means no chance of massive increases, which is good for affordability in a lot of ways,” Mr Powderly said. “Supply is always the biggest issue to fix pricing”. 

Looking overall at the market in 2019, Mr Powderly says Labor replacing the Coalition at the upcoming Federal election, and changes to negative gearing will not slow the Canberra residential property sector. However, a change in government would still have a significant influence on the market in 2019. 

“We have never seen a government not grow under Labor. The public service will grow and that’s good for our market,” he says. “It will provide more people in terms of population and employment growth, but the Coalition has been very good because it has been out-sourcing (to private sector contractors),” Mr Powderly says.

Labor’s negative gearing changes would impact on homes not new units, he said.

“Negative gearing will have a bigger impact in other cities but Canberra is a young city, it is all new stock coming through, so their policy does not apply to new units,” Mr Powderly said.

The approaching federal poll has brought more lobbyists into town, and coupled with out-sourcing and international flights into and from Canberra Airport have been powerful drivers of business activity.

Mr Powderly says Canberra hotels are enjoying the highest occupancies as well, and the new hotels under construction are desperately needed.

Mr Powderly says low vacancy rates, high incomes, low unemployment and Canberra’s strong economy were behind the new rental peak. Proximity to the CBD was another factor.

“Most of Canberra’s properties in the rental pool sit within 12 or 13 kilometres to the CBD, so are much closer locations. Compared to Melbourne and Sydney, where places are 30 and 40 kilometres out of the city in the rental statistics, Canberra is effectively a Concord or Strathfield in Sydney. So it is hard to compare city by city when we have everything in such close proximity to the CBD,” the property chief says.

Yields will bring investors back to some extent, and lending restrictions will be relaxed.

“The Royal Commission has meant banks have overreacted a little bit. The easing will mean it will be better for investors, because they will get good yields, and the borrowing rates are pretty competitive – 4 odd percent,” Mr Powderly says.

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14 Responses to
Units development pipeline key to rental vacancy relief
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taninaus 1:54 pm 14 Jan 19

I agree, the argument is flawed, units and unit rental prices are not the issue, that market has been stagnant for many years and is only just recovering which is relief for owners given costs have increased. The area with the highest demand from anecdotal examples (real estate agents should be able to verify this) is in the family home/separate home market. People wanting 3+ bedrooms, especially with pets on a bit of land, that is where people keep saying there is a lot of competition, and a lack of supply of more affordable (>$450/wk) properties.

    Wing Nut 7:35 pm 14 Jan 19

    That’s the part Barr just doesn’t get; not everyone wants to live in an apartment just as not everyone is able to utilise public transport but between him and Rattenbury the ACT is being pushed in a direction that does not met the needs of its residents.

12:12 pm 14 Jan 19

Nope!! Not everyone wants to live in an apartment. There is already a glut of apartments and areas that used to get high rent like Belconnen and Braddon are now having to drop their rents to get rented. Eg: A unit in Belconnen that rented for 380 , 8 years ago is now renting for 350 due to there now being way too many units. Families want their kids to have backyards to play in and even many couples want houses to have pets and be able to entertain. Not everyone in Canberra wants to live in a unit. Plus many blocks are badly built and have ongoing maintenance issues. Where I live every single development around me has some kind of ongoing problem or defect. What’s wrong with providing cheaper, more affordable land so people can afford to build a house.

    1:11 pm 14 Jan 19

    Unfortunately many are choosing to build McMansions and not having backyards for children to play in. Of course not everyone has children, or children that are young enough to want to play in the garden, and many people aren't at all interested in gardening. Driving around suburbs shows that comment. This is marketed as rental, so likely less people with children in this market. Many singles and couples without children I would imagine, and many without an interest in gardening. A problem with living in an apartment building though is that smoking is allowed.

    4:44 pm 14 Jan 19

    I love appartment living and my rent is only going up. Just walked past 20 people doing an inspection for a newly available apartment in my building

    5:22 pm 14 Jan 19

    Rob Thomas yes but only in some areas and this time of year is peak rental period. I too love living in an apartment but not everyone wants to

    7:09 pm 14 Jan 19

    Libby Oakes-Ash nothing wrong with providing land, but the question needs to be asked where is this land coming from? Gungahlin is almost full, Molongolo will see us through a few more years but being closer will logically be more expensive. So where is this cheap land coming from?

    7:14 pm 14 Jan 19

    Before self government land was cheap now it’s unreachable for most people. Cheaper land at Googong and good sized blocks. You’re right we’re running out of land but it is completely out of control what land costs here in Canberra. It creates expensive houses everywhere .

    10:19 pm 14 Jan 19

    I just moved out of an apartment in Braddon for 450 that was snatched up for 480 after I left, one bedroom. The quality has gone up, and people don’t want to rent the low quality rubbish anymore.

    10:24 pm 14 Jan 19

    Again I say in some places only. NOT in the older parts of Braddon where units are 10-15 years old rents have gone way down. Those properties were well built and fetched good rents before 1000s of units have been built in Braddon and the City. Now owners have to drop rent. In belconnen the older well built units fetched good rents now belconnen has way too many units and more to come and those in the older units again have to drop to rent. I rented a one bedroom 8 years ago for 380 , this unit was recently listed at 350! I’m many parts of Canberra there is a huge oversupply. Low quality rubbish is being built all over Canberra!! Just because it’s new and shiny doesn’t mean it’s good quality. So many new developments have so many ongoing building issues.

    10:18 am 15 Jan 19

    Libby Oakes-Ash, sorry, that last bit is not true. There's only 1 place in Canberra with an oversupply (belconnen), and it's a pretty small surplus, not expected to last very long.

    Canberra has the lowest vacancy rates in the country, and recently became the most expensive place to rent.

    There is HEAPS of demand, even for units

    10:22 am 15 Jan 19

    Although you are right about land prices. The monopoly behaviour of the government has been disastrous for people trying enter the stand alone housing market

    1:04 pm 15 Jan 19

    Alex Thomson whilst controlled it isn’t actually a monopoly either. Who do you think is developing Denman Prospect and who developed the Springbank Rise end of Casey?

    1:07 pm 15 Jan 19

    Libby Oakes-Ash land was cheap after self government too. It started to increase around 2000.

    Ps it is a falacy/good marketing to day Googong is cheaper with larger blocks. On both counts the argument is marginal to the point of being negligible. It’s like saying Taylor is cheaper than Denman Prospect. Whilst true it’s not a like for like comparison.

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