admin-ajax.php

Is Canberra a good place to invest?

Canberra’s property market has been a quiet steady achiever – but is it a good place to invest? 

With the Sydney property market past its peak I know some investors and buyers’ agents are looking to Canberra as an alternative canberra-266338_1920

Sure, Canberra is less than 300km southwest of Sydney, and it has enjoyed solid capital growth of 23 per cent over the past five years and 10 per cent in the past 12 months.

But it’s not on my investment radar and I’ll explain why, but first let’s look at some of the stats.

RiskWise Property Research has provided the following background to the Canberra market…

Canberra Property Market Under the Microscope 
ad_build_wealth

1. Strong labour market and population growth – major growth drivers 

The ACT has a strong labour market.

The unemployment rate of 3.9 per cent is low – even below the NSW average.

This is unsurprising given the strength of its labour market and that the Federal Government is a major direct and indirect employer.

This is also supported by the relatively low underemployment and the low effective unemployment rate across the ACT.

Graph 1

2. Population growth

The ACT enjoys consistently strong population growth, particularly over the past six years.

It also recorded a population growth rate of 1.7 per cent, the second highest rate growth across the country according the latest ABS data.

The attractiveness of the local labour market has been a key driver force behind this population increase and this growth trajectory is likely to continue.
Graph 2

3. Capital growth – houses Vs. units

While both houses and units enjoy good demand, the demand for houses is very strong and houses enjoy, consistently solid capital growth of 23 per cent in the past 5 years and 10 per cent in the past 12 months.

That has significantly exceeded the capital growth of units that delivered 4 per cent in the past 5 years and 5 per cent in the past 12 months.

Graph 3

4. Median rental return

The rental return for houses and units are 4.2 per cent and 5.1 per cent, respectively – these rates of returns are significantly higher than the rental return in Sydney.

5. Units in the pipeline – short term risk 

The number of units in the pipeline for the next 24 months is 5,290, being an addition of 8.1 per cent to the current stock.

Investors who purchase off-the-plan properties are exposed to risk of poor capital growth and lower rental returns than expected in the short to medium-term as the area adjusts to the additional supply level.

Good for home owners – not so good for investors

While Canberra may be a great place to live and buy your home, the high level of rates and the excessive land tax takes the cream of investing in Australia’s capital and that’s why we don’t recommend investing there. 9180619_l

Apartments are an increasing focus of government revenue as the boom in apartment building continues and the number of new standalone homes stagnates.

Last year the Canberra Times reported how owners of units and apartments faced a big rates hike as the ACT government moves to bring their rates into line with freestanding houses.

On top of that, rates for all homeowners, including owners of apartments, increase an extra 7 per cent in July last year, and will continue to do so each year as part of the government’s shift to higher rates and lower stamp duty.

But that’s not the end of the bill shock for people who own units. If the apartment is rented out, their owners – property investors – will also face a substantial increase in land tax – averaging about $480 extra a year!

These rates and land tax hikes are some of the reasons the CanberraTimes reported that landlords are looking to sell up in Canberra.

Maybe the locals know something you don’t know – don’t be tempted to buy in Canberra.



icon-podcast-large

SUBSCRIBE & DON'T MISS A SINGLE EPISODE OF MICHAEL YARDNEY'S PODCAST

Hear Michael & a select panel of guest experts discuss property investment, success & money related topics. Subscribe now, whether you're on an Apple or Android handset.

 

NEED HELP LISTENING TO MICHAEL YARDNEY'S PODCAST FROM YOUR PHONE OR TABLET?

We have created easy to follow instructions for you whether you're on iPhone / iPad or an Android device.

icon-email-large

PREFER TO SUBSCRIBE VIA EMAIL?

Join Michael Yardney's inner circle of daily subscribers and get into the head of Australia's best property investment advisor and a wide team of leading property researchers and commentators.


Avatar for Property Update

About

Ahmad is the senior property strategist at Metropole Properties Sydney and highly skilled wealth strategist. He is a passionate property investor, has a degree in Commerce, is a licensed estate agent and qualified property investment advisor and has personally coached and educated hundreds of clients to create wealth through property.
Visit www.SydneyBuyersAgent.com.au


'Is Canberra a good place to invest?' have 4 comments

  1. Avatar for Property Update

    March 21, 2018 @ 5:19 pm Doron

    Ahmad,
    The rates are meaningless in the broader scheme of things. Also, you’re talking about an extra of $480 a year? that’s all? is it a typo?…
    I’d propose that you use our free calculator to asses the situation – a word from an accountant…
    https://www.riskwiseproperty.com.au/Calculators/Cashflow
    Doron Peleg

    Reply

    • Avatar for Property Update

      March 21, 2018 @ 9:38 pm Michael Yardney

      Doron
      While I respect your research, and that’s why we have you on our team of expert commentators here at Property Update, I tend to agree with Ahmad that while the short term prospects might be good in Canberra, as a long term investor I’d rather see my money in one of the 2 superstar cities – Melbourne or Sydney

      Reply

    • Avatar for Property Update

      March 22, 2018 @ 12:34 pm Doron Peleg

      Michael,

      Thanks for your feedback – it’s great to have different views

      A couple of points…

      The first one is that cash flow considerations, including rate changes, insurance premiums, etc, are not major costs, when we take into consideration the capital growth and the overall return (capital growth + cash flow), for a $700k property.

      The second one is houses in the ACT market

      Melbourne, no doubt, is a great market for houses – you’ve published our positive projections on that market.

      https://propertyupdate.com.au/good-news-for-melbourne-property-market/

      The Sydney market carries a relatively low level of risk only for houses – however, these properties are extremely unaffordable to the typical investors. Units in many areas in Sydney carry at least a medium level of risk. Any changes to government policy (e.g. negative gearing changes, major development proposals by the NSW State Gov), could have a major impact on that market for the long term

      Which means, people who seek affordable houses that carry low risk and solid return, need to consider the ACT.

      We will, obviously, review the performance of each market on a regular basis – time will definitely tell – so far our success rate is 96%, and trending up…

      Reply

      • Avatar for Property Update

        March 23, 2018 @ 12:56 pm Doron

        Michael,
        Thanks for your feedback – it’s great to have different views
        A couple of points…
        The first one is that cash flow considerations, including rate changes, insurance premiums, etc, are not major costs, when we take into consideration the capital growth and the overall return (capital growth + cash flow), for a $700k property.
        The second one is houses in the ACT market
        Melbourne, no doubt, is a great market for houses – you’ve published our positive projections on that market.
        https://propertyupdate.com.au/good-news-for-melbourne-property-market/
        The Sydney market carries a relatively low level of risk only for houses – however, these properties are extremely unaffordable to the typical investors. Units in many areas in Sydney carry at least a medium level of risk. Any changes to government policy (e.g. negative gearing changes, major development proposals by the NSW State Gov), could have a major impact on that market for the long term
        Which means, people who seek affordable houses that carry low risk and solid return, need to consider the ACT.
        We will, obviously, review the performance of each market on a regular basis – time will definitely tell – so far our success rate is 96%, and trending up…

        Reply


Would you like to share your thoughts?

Your email address will not be published.
CAPTCHA Image

*

facebook
twitter
google
0
linkedin
0
email

Michael's Daily Insights

Join Michael Yardney's inner circle of daily subscribers.

NOTE: this daily service is a different subscription to our weekly newsletter so...

REGISTER NOW

Subscribe!