Canberra Property Market Overview September 2017
Every few months it is a good idea to take a new look at the current state of the property market. This helps us to understand how we have tracked recently and how we are likely to track into the future. While attending a particularly special property investing conference I managed to access a unique insight into the current state of property in Australia.
Here is a brief rundown on how Canberra is tracking in the national property market.
September 2017 – Canberra Property Market
Nationally rental growth is accelerating. This means that the growth in rental rates is increasing year on year. This is particularly prevalent in Canberra as it has experienced the highest weekly rental growth of any capital city in Australia at 8.9% annually. This is far above the next contender of Hobart at 5.7% and Sydney at 5.1%.
However, nationally gross rental yields have been declining. This is due to the increase in property prices we have seen. Simply put, property price growth is outstripping rental yield growth. Therefore, the gross yields or rental income in relation to money invested in a property has declined.
Hence, Canberra is one of the better targets for negatively geared properties and for buy, hold, rent properties for investors.
The next element to look at is the property sales. On a general level, the time taken to sell a property has been decreasing over an extended period of time. Although it has seen a small increase recently. We are also seeing a low discount rate on property sales at just above 5%. This is the percentage of immediate house price deducted for a property to sell. Hence, a low rate means you are paying closer to the properties actual value when you purchase.
Next, there has been a national decrease in the supply of homes for sale. This is, however, due to only particular capital city markets. Canberra itself has experienced the highest increase in new homes on the market at a 17% increase in the past 12 months. Canberra’s size is what makes this number negligible to the national decrease in home supply.
We have also seen investor dropouts over the past 12 months due to decreasing confidence in the stronger markets such as Sydney and Melbourne.
This means generally, house prices are falling and Canberra is becoming a small haven for investors and buyers. This is due to a higher supply of homes, especially compared to other cities and higher rental returns.
We should also begin to see Canberra outperforming the national market in terms of house price growth. This is due to its long run tracking of the market and the likely slowing of house price growth in Sydney and Melbourne.
The cash rate is also very low and will stay that way for some time. This means that loans are still very accessible and it is a good time for people to invest in new property in markets outside Sydney and Melbourne.
What About for Sellers?
This is not to say that Canberra is not also a sellers market however. Canberra is going to be one of the beneficiaries of the changes to the other major cities. This is not a one-sided coin, both buyers and sellers are going to see increases in returns. This may seem strange, but it is the reality of any market increase, especially when it is outperforming other cities nationally. We should see a more stable and increasing house market in Canberra that will bring profits directly to those selling and returns to those moving in.