Canberra has had a good long run of solid growth and rental return, which has lead investors to seek exposure in this market as a low risk option.
The current unemployment rate of 3.9% is one of the key reasons for buyers’ positive sentiment and is largely supported by the federal government being the main employer. The strong employment market has been driving population growth, which has been driving demand for property.
Units do not appear to the be asset class of choice for the market. Although units have seen a 5% growth rate over the past year, over the past 5 years units have been a massive under performing market (4%). Add to this the fact that there are 5,290 units in the pipeline over the upcoming 2 years and one would think carefully before investing in Canberra units. Riskwise believe that these additional units will be absorbed into the market quickly and do not foresee this causing a correction in the market.
Houses have seen significant demand, which has driven prices. The housing market has seen 23% growth over the past 5 years and 10% in just the past 12 months. Compare this median increase in value with the hedonic index increase over the past 12 months of only 3.8%. We need to make sure we understand what numbers we are looking at! A good description of what a Hedonic Index is can be found here.
Currently houses are achieving an average gross yield of 4.2% and units achieving 5.5%. This is a comfortable yield and is upheld by a vacancy rate of 0.8% across Canberra.
Ongoing infrastructure projects such as the Canberra Light Rail Network will have a positive impact on the ongoing employment and population growth and overall capital growth prospects for the Canberra market.
According to the Meridian Investor Panel, the affordability measurement of Canberra is third to Perth and Tasmania. The fact that the economic position of Canberra is more stable than both of these other cities makes it more desirable from an investment perspective.
This market has represented a stable housing market and the current
rental pool is strong. A major contributor to the job market is the federal government. It is uncertain as of today if the current government will be in power after a future vote and, if there is a change, what that will do to the property market. All said, the housing market looks to be stable and so long as the labor force stays strong, there is no reason to think this will change.
For more information and our review of this market have a look at the latest Coffee & Property episode where we discuss this in detail HERE.