Canberra August 2017

The month in review: Canberra

By Herron Todd White
August 2017

Recent changes to lending and legislation, aimed at enabling first home buyers to enter the market, has had an effect on property investors looking to expand their portfolios. These measures were introduced in an effort to allow first home buyers to be more competitive in a heated market. As a result, property investors looking for an asset with good yield and growth will have to do their research and be willing to go the extra mile to secure a profitable investment.

Unlike other states, the ACT has not introduced a scheme which cuts stamp duty for first home buyers. There are some incentives available via the government and private developers however nothing similar to those in New Sourth Wales and Victoria.

With the increased supply of apartments coming onto the market over the next year, the ACT has seen relatively slow growth for this style of property with some properties loosing value. However, rental demand for apartments has remained strong despite the increase of supply. If property investors are chasing yields and not capital growth, purchasing a new apartment may be a good option. This is particularly relevant for apartments in the CBD and district centres such as Woden, Tuggeranong, Belconnen and Gungahlin. Apartments in proximity to University of Canberra and Australian National University also offer good investment opportunities. It should be noted that new apartments in Molonglo Valley, Gungahlin and Tuggeranong may experience low to no capital growth over the next few years due to increasing supply.

Rental yields in detached housing have remained steady but like other capital cities, capital growth has been very strong. An option for investors in the ACT may be to purchase a vacant block through the Mr Fluffy Asbestos Removal Scheme. There are several hundred blocks being introduced to the market most of which are in sought after established areas. Land banking one of these blocks and either selling or developing later may be a profitable option providing investors are able to cover the initial costs. However, developers should be wary of the changes to the Lease Variation Charge which took effect on the 1st of July 2017. These changes have significantly increased the fee required to build multiple units on residential blocks.