By Herron Todd White
First – the COVID-19 update.
The pandemic has affected all aspects of our life and the housing market is no different although Canberra appears to have weathered the storm better than most. At this stage we are approximately three months in and we don’t appear to have seen a significant impact on the housing market although only a fool would try to predict the long-term effect on both the local and national economy.
Of course, restrictions are in place which hampers marketing and open homes, but demand remains high and most agents are stating that there is a limited number of housing stock coming onto the market and demand is outstripping supply. There are many factors at play here, but most people would claim this is due to the large reliance on Public Sector employment and the relative job security this offers.
The latest figures from Core Logic show that average Canberra house prices rose 0.1 per cent last month (June) which is a contrast with Sydney and Melbourne which have seen a 1.1 per cent decline over the same period. Only Darwin and Hobart have performed better with a monthly increase of 0.3 per cent reported. However, Canberra proudly sits third on the ladder when it comes to annual house price increases (6.3 per cent) behind both Sydney (13.3 per cent) and Melbourne (10.2 per cent).
And onto the investor’s playbook. The investment market remains buoyant with investors attracted to Canberra’s steady property market rather than the volatility of the markets in other capital cities. Recent research shows that rental vacancy rates are low revealing that the rental property will be on the market for an average of 23 days which is only beaten by Hobart (17 days) and far better than Sydney (35 days), Perth (42 days) and Darwin (52 days).
The Canberra suburbs which appear to be the most popular for rentals are in the North side of Canberra with both Bruce and Belconnen heading the list probably due to the affordability of units in these areas and close proximity of both Civic and the University of Canberra. It is not uncommon to see Rental Yields for units and townhouses in some of these areas as high as six to seven per cent. On the flip side of this, with no end in sight of the continual construction of units close by, capital growth is virtually zero.
Areas where the Rental Yields are the lowest also coincide with the longest average time spent on the rental market and these include Forrest (36.5 days), Deakin (30 days), Red Hill (30.4 days) and Yarralumla (30.7 days). Median house prices in these inner south areas range from $1.375 million (Deakin) to $2.8 million (Forrest). Yields here are in the region of three-to-four per cent but capital growth is expected to be steady.
Dwellings, in other more affordable areas of Canberra suburbia, including Weston Creek in the South and Giralang in the North offer yields in the region of four to five per cent.
The main driving forces for the Canberra rental market are the transient population particularly people working on short to medium term Government or Defence contracts who need accommodation whilst they remain in the City. Students also drive demand although it will be interesting to see how Covid – 19 will affect this sector of the market over the coming months.
According to the latest CoreLogic figures, the gross rental yield for houses in Canberra is 4.3 per cent, while in Sydney it’s 2.7 per cent and Melbourne is 2.8 per cent. It is therefore clear why Canberra is now coming on to Investors radars.
Speak with a Canberra Mortgage Broker today.
DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.