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Is Canberra a good place to invest? - featured image
By Brett Warren

Is Canberra a good place to invest?

Canberra’s property market has been a quite 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

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 employment.

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 of growth across the country according to the latest ABS data.

The attractiveness of the local labour market has been a key driving 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 the 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 homeowners – 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 Canberra Times 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.

About Brett Warren Brett Warren is National Director of Metropole Properties and uses his two decades of property investment experience to advise clients how to grow, protect and pass on their wealth through strategic property advice.

Thanks for Sharing informative content about Canberra real estate market. I want to purchase a commercial property in Canberra. How much tax and duty I have to pay?

0 replies

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... h ...Read full version

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