The month in review: Canberra
By Herron Todd White
The investor market in Canberra has generally increased as of late with the loose fill asbestos (Mr. Fluffy) government buyback scheme proving to be the main stimulus for investment. The nature of this scheme opens up the potential for smaller developments and subdivisions to occur, in particular, smaller townhouse developments.
Potential investors or opportunistic builders and developers are actively looking for the right block with the appropriate zoning to possibly develop. This generally leads to a ripple effect within the suburb as values could increase due to the increased activity stimulation these potential blocks attract. This has not come into full effect but we see that this trend is on the cusp of occurring.
However we can currently see that demand for general investment has tightened due to the slowed market conditions of Canberra. The current lease variation charges that developers must take on has been the biggest obstacle in investment and development.
There is still a significant amount of construction occurring in Canberra, whether it be units, in particular the north side and Molonglo Valley, or the development of green sites in Lawson, Moncrieff, Wright and Molonglo. The strong population of builders, which is a mixture of local and out of towners can see the potential opportunity of investment in these blocks of land and are expressing interest in these areas.
These particular Mr. Fluffy blocks are predominantly within certain established circa 1940s to 1980s geographical pockets around Canberra where asbestos has been previously used. These pockets are mostly the inner city, Weston Creek/Woden Valley and the older suburbs of Belconnen and Tuggeranong.
The yields that achieve a stronger return are found in the newer suburbs of Gungahlin and Woden Weston (5% to 6%) as the price points ($500,000 to $700,000) are relatively low and the quality of surrounding services is appealing. This yield is also evident in the modern areas of Macgregor as this suburb provides affordable modern dwellings ($400,000 to $600,00). The inner suburbs have a 3% to 4% yield due to the higher price points ($600,000 to $1 million) of these areas and the increase in newer boutique unit developments. As always in Canberra, it’s the inner suburbs that retain relatively strong capital value. Location is king.
Lawson is a brand new suburb in Belconnen and is in very close proximity to the University of Canberra and Westfield Belconnen. The vacant land sales have been very strong and we have noticed that some investors have been looking to build large dwellings accommodating a higher amount of bedrooms and bathrooms, perhaps looking to rent out the many rooms to potential students and increasing their gross yield. Location is the major driver, however until the suburb and general development of buildings and the respective services are completed in the area we cannot fully determine the extent of this.
The availability of the Mr. Fluffy sites with development potential in the ACT will eventually run out in the medium to long term however the NSW government has recently acknowledged the presence of Mr. Fluffy dwellings in the NSW Queanbeyan region. Perhaps similar townhouse and unit developments will occur in these areas.