The Australian Capital Territory and Canberra itself has an ongoing dwelling shortage. Relatively unaffected by the global financial crisis, strong demand is set to push ACT prices even higher. Andrew Johnstone reports.
The Australian Capital Territory (ACT) has grown 10.94% annually for 10 years, at almost twice the pace of either Sydney or Melbourne.
Even during the global financial crisis, Canberra has proven resistant to falls because of the major shortage in houses and apartments. With the ACT and Federal Governments the dominant employer for the local workforce Canberra has been somewhat insulated from the declines in other cities.
"There is a shortage of property for sale and that is holding prices pretty firm," says Brian Nancarrow, principal, Century 21 City Walk Canberra. "There has been no back peddling of prices. There was a plateau but prices are starting to rise."
Tight rental markets, high yields and strong price growth has attracted interest from investors.
"The best opportunities are anything affordable you can find close to the city centre," says Cameron Kusher, senior research analyst, RP Data. "Canberra does not have a lot of diversity in stock. It comes down to amenity and location."
Kusher says Canberra's medians prices for the lower markets are closer to those of the upper markets compared to other Australian capitals. Median prices range from $350,000 at the low end to $1 million at the top end. For this reason location and amenity are paramount.
Investors should look for strong rental yields and tenancy in well located units and houses, particularly in the North Canberra and Belconnen districts says Kusher.
"Rents are rising, they will continue to rise. Rents are starting to creep up," says Nancarrow.
There are two factors at play in Canberra, says Nancarrow. Firstly, demand outstrips supply across the market. Secondly, this is compounded by the lead and lag in development of new housing and apartment stock, because of planning issues and developers' inability to obtain finance.
"Great supply came to the market, then it stopped, then demand charged on and amplified the shortage that was already there," says Nancarrow.
In addition, the first home buyers' scheme has driven up the price of apartments from a median of around $350,000 to $400,000 in the first half of the year. First home buyers have been competing with investors for the same stock.
The next band between $500,000 and $700,000 was dead 6 months ago, says Nancarrow. But that's the price range where probably the most value is and probably the one that is going to take off, but there is no guarantee.
But Nancarrow points out that for the over $500,000 segment, whilst investors might not necessarily find a bargain, they will find a sound investment.
Further out of Canberra, along the northern approaches to the city there are more affordable options for investors, says Nancarrow. In Gungahlin you can get a 3 bedroom house on a good block for around $400,000.
New developments in Barton are also offering investors the rare opportunity to buy apartments close to the city and Parliament House.
At the top end prices did come back by around 20% says Nancarrow, but this market has shown some big sales in the last few months particularly from international buyers.
Looking ahead, ACT properties are expected to perform solidly.
"We believe the ACT will see a strong and substantial period of growth. This is due mainly to the significant number of Government programs, and coupled with population growth above 1%, will see solid employment growth," says Paul Powderly - State Chief Executive, Colliers International ACT.