Canberra, our nation’s humble capital. It might not be the first place you think of when it comes to property investing, but it probably should be!
Canberra has a lot going for it. For starters, there’s plenty to do, despite what Sydneysiders or Melbournians think. Not many cities can claim a two-hour drive to both the beach and the snow, but it doesn't stop there.
Canberra has world-class museums, trendy bars and stunning lakes and reserves. The whole city was planned from the start, which basically means you don’t have to sit behind 20 cars at every traffic light (I’m looking at you Sydney).
Canberra is a very livable city, but what is its property market like, and why should you consider investing there?
Well for starters, Canberra has had solid population growth and a strong labour market for some time. Unlike just about all of the rest of the country’s capitals, Canberra actually experienced growth in 2018. Yep, that’s right!
According to various sources, median house prices actually increased over the last 12 months, which is enough to silence any smug Sydneysider!
Despite this, Canberra’s property price remains comparably low to that of other capitals. Another positive is that Canberra’s rental market is strong, with vacancies sitting very low, and overall rent prices sitting in the top three of the whole country. So low house prices and a booming rental market, it sounds like an investors dream!
What did the property market in Canberra look like in 2018?
Most of Australia’s capital cities are licking their wounds after a year that saw significant drops in property prices. A number of factors led to a nationwide slump, including:
- Tighter lending measures, particularly for interest only loans
- Less foreign investment
- The lowest clearance rates in 20 years
- An oversupply of units in many states
These factors led to property prices taking a slide in many states... except in Canberra.
Australia’s capital city actually bucked the trend when it came to property values, with median house prices increasing 3.3% over the last year, according to CoreLogic data.
"Australia's capital city actually bucked the trend when it came to property values, with median house prices increasing 3.3% over the last year, according to CoreLogic data."
But to put this in perspective, according to the same set of statistics, this figure is actually down significantly from 2017, which saw a growth of 9.7%. In fact, Canberra has actually benefited from six uninterrupted years of property value growth.
It seems that the same factors that have slowed down the rest of the country, namely tighter lending measures, have also had an effect on Canberra, but just not to the same extent.
So, what was Canberra’s lifeline?
Well, as you may know, Canberra is home base for the Federal Government, which supports many direct and indirect jobs, resulting in a strong labour market. Canberra is also an education hotspot, and these factors combined have resulted in a continuous stream of interstate migration, as well as overseas migration, driven by international students.
This migration has also benefited Canberra’s rental market. Vacancy rates in Canberra were a minute 0.8% in June 2018, and overall rental prices increased 7.3% for houses and 3.9% for units, according to Louis Christopher's Housing Boom and Bust report. Shortages in rental stock have enabled landlords to increase rent prices, however, with a large supply of new units hitting the market, this situation is unlikely to continue.
Canberra property market forecast 2019
After 2018 saw a slowing in Canberra’s steady property growth, 2019 looks to continue this trend. A looming oversupply of units has led to many prospective home buyers choosing to remain as tenants due to cheaper rents in the unit market.
Additionally, some demand may have shifted out of Canberra’s housing market and into the border towns of New South Wales due to more affordable prices and the option of First Home Owners stamp duty exemptions.
Despite this, growth is predicted to remain above the national average, and according to QBE’s Australian Housing Outlook, Canberra will see 10% growth between 2019 and 2021, where median house prices will rise to $745,000 by June 2021.
"... Canberra will see 10% growth between 2019 and 2021, where median house prices will rise to $745,000 by June 2021."
Some major factors that will support Canberra’s growth over the next few years include:
- A strong labour market supported by direct and indirect jobs created by the Federal Government as well as Canberra's universities.
- The ACT’s unemployment rate of 3.9% - below even NSW’s rate.
- Strong population growth, both interstate as well as international, as new migrants look to benefit from Canberra’s strong job and education opportunities.
- Proposed zoning changes looking to change the density of the city to accommodate more multi-level developments.
- High rental demand, particularly of detached houses.
How are Canberra house prices expected to change in 2019?
Property experts hold the consensus that Canberra’s steady growth is set to continue throughout 2019 and beyond, which should catch the eye of any keen investor.
QBE’s Australian Housing Outlook predicts that Canberra’s median house price will experience growth of 3% in 2019, bringing the median house price to $695,000. QBE also predicts that houses will experience 10.4% total growth in the period between 2019 and 2021, which is the third-best figure behind Brisbane and Adelaide.
Despite this, units are forecast to experience growth at a much slower rate, with a small 0.2% increase over the year, taking the median unit price up to $440,000. The years following, however, will see growth gradually increase, with a total of 5.9% between 2019 and 2021.
Louis Christopher's Housing Boom and Bust report details that Canberra’s combined property prices will continue to increase slightly in 2019. However, his figures are dependent on how 2019 pans out. Christopher predicts:
- A +1% to +5% price increase if cash rates remain unchanged, the economy continues to slow and a Labor government is elected in May.
- A +1% to +4% increase if interest rates rise +0.20%, cash rates remain unchanged and a Labor government is elected in May.
- A +3% to +5% increase if a -0.50% rate cut is passed, starting in the 2nd quarter if the AUD remains between $0.65 and $0.75 USD and a Labor government is elected in May.
- A +3% to 7% increase if the Liberal government remains.
Is unit oversupply an issue in Canberra?
In recent years, Canberra has seen a dichotomy form between units and detached houses. Between 2017 and 2018, the completion of units rose 128% above the 20-year average.
"Between 2017 and 2018, the completion of units rose 128% above the 20-year average."
Comparatively the completion of detached houses has been falling. Between 2012 and 2013, 1,839 dwellings were completed, while the 2017 to 2018 period saw this halved to just 900 dwellings.
This large investment in new units has resulted in an oversupply. As the new stock comes to market, the value of older units has dropped, which has been made evident in the median unit price, which fell 1.6% in the year to June.
Best suburbs to invest in Canberra
Canberra looks like a safe bet for investment, even if growth does slow slightly in the next year. So, where can investors make the most of this stable growth?
According to SQM research, investment hotspots are generally located close to town centres that are still nearby to Canberra CBD. Be sure to look out for:
As Canberra has been designed around town centres, suburbs within close proximity to shopping facilities, amenities and entertainment are expected to grow substantially.
Suburbs around Belconnen are tipped to perform particularly well, due to the close proximity to the University of Canberra, Belconnen town centre, the city centre, and Lake Ginninderra.
Use the resources on this site to help you make your Australian property investment decisions. Read our online property reports and tips to help you find the right real estate agent.