Canberra is hot property for investors
03 May 2018
Every other day we hear a media story claiming the Canberra apartment market is in the doldrums.
Just this week, the tired mantra that Canberra’s unit market is stagnating, with no sustained growth in recent years, has been rolled out again.
These claims couldn’t be further from the truth. In fact, Canberra is a veritable goldmine for investors compared with other Australian cities.
A year ago, the Australian Prudential Regulatory Authority (APRA) strengthened its risk management policies around investor lending.
These measures included limiting new interest-only lending to 30 per cent of new residential mortgage lending and ensuring that the annual growth of lending to investors remained below 10 per cent.
While this had the effect of dampening the investor market across Australia, it didn’t take investors long to come back to Canberra.
Latest figures from the ACT Treasury show that through the year to February 2018, the value of new investor housing finance in the ACT increased by 4.5 per cent.
This was in stark contrast to the national scene where in the 12 months to February 2018, the value of new investor housing finance across Australia decreased by 8.6 per cent.
Following three months of consecutive decline, investor loans in the ACT increased by 9.4 per cent in February 2018, whereas, nationally, the value of new investor housing finance increased just 2.9 per cent.
In more good news for the Australian capital, the ACT in February recorded the second highest per capita value of new investor housing finance of any State and Territory, at $423 per capita, only lower than New South Wales ($491 per capita). The national average was $338 per capita.
So, Canberra really is hot property for investors, especially when compared with investing in other capitals, despite the repeated stories to the contrary.
And here’s why.
The tight rental market in Canberra (less than one per cent vacancy) means rents are strong and yields are higher. For example, a $500,000 investment property in Sydney might get 3-4 per cent return on investment. That same $500,000 invested in Canberra could achieve a 5-7 per cent return, depending on location. That’s music to the ears of property investors.
Being home to major federal government departments as well as the ACT government means we have high employment, low unemployment, and higher-than-average wages, which means renters typically can afford to pay higher prices, and do.
Another key factor in Canberra’s attraction as an investment destination is infrastructure. Not only do people want to live along the light rail routes (this has been a major driver behind investor sales in, for example, the Grand Central Towers development in Woden), but also close to major shopping centres, hospitals, schools, universities, waterways and public transport.
As an investment location, for example, Belconnen delivers on all of these. In fact, we are so confident in the prospects for this location that we are offering a rental guarantee of 7 per cent for investors in our Republic and Dusk projects through our innovative GeoInvest program.
A Sydney buyer’s agent recently described Canberra as the best kept property investment secret in Australia. While the apartment market in other capitals might be cooling off, our counter-cyclical market is heating up, buoyed by a rapidly-increasing population.
Investors are an important part of the buyer mix for the Canberra market; they contribute to the supply of rental housing, which is critical amidst a rental crisis such as that being experienced in the ACT.
Investing in Canberra now, by both local and outside investors, is a strong expression of confidence in our economy and the future growth and prosperity of our city.