Canberra June 2018

The month in review: Canberra

By Herron Todd White
June 2018

Canberra’s residential housing market heads into the second half of 2018 off the back of a period of overall positive growth and market sentiment. Buoyed by Canberra’s historically low levels of unemployment, high job security and high average weekly earnings, the median house price in the Territory for the quarter ending March 2018 was $727,914, making it at the time, the third highest median house price in the country. Quite the positive self-endorsement of its own residential housing market when you consider Canberra-Queanbeyan only has the eighth highest population in Australia.

On the topic of population, the latest ABS Census of 2016 revealed that Canberra’s Gungahlin District, located in the outer northern part of the city, recorded the second fastest level of population growth within Australia from the 2011 Census, helping Canberra’s population count surpass the 400,000 mark for the first time ever. On a ground level basis, this population growth can be seen by residential valuers working within the Gungahlin District from the mostly overseas born migrants who are fast absorbing the new residential housing stock being released onto the market as well as purchasing existing stock within the district. This is conducive to the overall national trend of positive migration into Australia over the past decade or so, largely made up of skilled migrants. Closer to the CBD, we find the familiar scenario of the prestige and blue-ribbon suburbs and Canberra’s residential housing market is no different.

The inner southern and northern suburbs such as Forrest and Deakin to the south and Reid and Turner to the north have always had strong demand and limited supply and heading into the middle of 2018 sees the status quo maintained. However, growth within Canberra’s inner north has been particularly strong in recent times, thanks not only to the established character dwellings, leafy streets and anticipated hype surrounding the city’s first lightrail project along Northbourne Avenue but also the RZ2 zoning, allowing dual occupancy and medium density developments in areas once characterised by dwellings on nothing less than the old quarter-acre block.

With demand generally remaining strong over the six months to June 2018, auction clearance rates within Canberra still tend to be in favour of the vendor but are showing signs of being down on the rates achieved in the early quarters of 2017. However, properties that are passed in or sold by private treaty don’t seem to sit on the market long if priced accordingly and tend to be quickly absorbed by the overall demand within the city.

The unit market however isn’t so black and white. There continues to be mixed results across the Canberra unit market, with small 1- and 2-bedroom apartments and units showing signs of either negative, stagnant, or very limited capital growth based on resale values, which may only be compounded further into the latter half of the year as more brand new stock is released onto the market, particularly in the Gungahlin District. With the Gungahlin town centre becoming a new transport node in the outer north upon completion of the lightrail terminus there, and Flemington Road becoming an urban corridor of high-density apartment complexes straddling the new light-rail track, the past few years has seen medium to high rise complexes springing up throughout the district.

Completion of the Mezzo and Infinity Towers developments in Gungahlin in recent months has seen the addition of over 500 new units to the area, with a further three separate medium to high rise developments nearing completion, currently under construction or in pre-sale stage. Off the back of the district’s positive population growth, the newest stock has been absorbed but with so much in the pipeline, there is a lot resting on that growth to continue. Larger 4-bedroom apartments and units however seem to have a firmer trajectory of growth, with some either remaining firm or showing some growth, often swallowed up by those pushed out of the much more expensive housing market for similar sized accommodation properties.

Rental costs throughout Canberra also tend to reflect the overall theme of positivity, with increases or stability upon yearly review periods. Surprisingly, despite a large amount of high-density apartment and townhouse developments coming onto the market in Canberra, the rental vacancy rate remains low and is anticipated to stay so. This factor added to the growth in population and Canberra’s historically transitional workforce may lead to increased competition at rental inspections, ultimately leading to an increase in rents.

Overall Canberra finds itself in a good position as the calendar turns over to June 2018, with the residential housing market in safe hands fostered by strong demand, increased population and stable market sentiment in the core product. The residential unit market has also crossed over into the second half of 2018 as a winner, of sorts, with low vacancy rates returning good rents for investors and new stock seemingly mopped up by the steady flow of new residents into the market.

Heading towards the end of the year, recent hindsight tells us that Canberra’s housing market will remain solid in demand, growth and new supply. The unit market, however, will be one to watch, with further new stock to be added to the supply line by year’s end. If current absorption rates backed by good population growth continue, the market will cap off what has been a good year for unit developments.

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