After a year of being eclipsed by the heated Sydney and Melbourne markets, how does Canberra real estate look set to perform in 2016, and which are the suburbs to keep an eye on?
How does Canberra stack up?
Canberra’s dwelling prices went up by 4.1% over 2015 according to CoreLogic RP Data – equalling Brisbane’s performance and making it one of only four capital cities (all in the eastern region) to see positive growth for the year.
Looking ahead, Louis Christopher, managing director of SQM Research, has predicted likely annual dwelling price increases between 2% and 6% in Canberra in 2016, depending on factors such as interest rates and the economy.
Tim Lawless, CoreLogic RP Data’s head of research, said in December that “the Canberra housing market has … been showing tentative signs of growing values along with Hobart”, although he also noted that “market conditions have been more volatile from month to month in these [cities]”.
The nation’s capital is quite a bit more expensive than Hobart – and indeed many capitals – to buy into, with its median dwelling price of $585,000 lower only than Sydney’s and Melbourne’s.
Overdosing on apartments?
It's important to note that there are significant differences in predicted value performance of Canberra’s houses and units. While the former went up 4.5% over 2015 on CoreLogic RP Data numbers, the latter fell 0.8%.
Catherine Smith, practice manager of Canberra property investment advisory firm Wholistic Financial Solutions, warns that the city could be “fast heading towards an oversupply of units”.
Among the many apartment complexes currently under construction is the Wayfarer in Belconnen, which at 88m will be Canberra’s tallest residential tower when completed by the end of the year. But this comes after 12 months in which the suburb’s median unit prices fell by around 4%.
"If development continues at this rate I wouldn't be surprised to see Canberra listed as the most oversupplied state or territory in Australia," argues Smith.
Whether or not Canberra units will struggle in 2016 for capital growth, rental returns have showed signs of positivity. In December, CoreLogic RP Data reported the city’s gross unit rental yield was 5.2% – equal to Hobart and Darwin and second only to Brisbane.
Christopher predicts Canberra will see an increase of 1% to 3% in median weekly asking rents – better than the growth predicted for all other capital cities except Melbourne and Hobart.
What makes Canberra unique?
The housing market in the national capital is closely tied to the outlook for the public sector, Canberra buyers' agent Penny Hyde says, and recently she has observed signs of some optimism.
“December is typically a quiet month for us. But right up until Christmas Eve last year I was showing properties to potential buyers. That hasn’t been the case for some time.”
In terms of the types of suburbs in vogue, Hyde calls out suburbs experiencing urban renewal to create a sense of community for families.
She cites Aranda as one suburb reaping the rewards of urban renewal, with CoreLogic RP Data noting annual median house price growth in Aranda of around 22.5% last year.
“Proximity to the big public sector employment precincts in the city centre, Belconnen and Tuggeranong is important to Canberrans, particularly as its public transport is not as good as Sydney’s or Melbourne’s,” says Hyde.
“Also important are the school catchment areas, especially for family renters."
But Hyde argues that perhaps most important factor of all in Canberra real estate is the perception of government stability. "One thing that consistently dulls the hum is inconsistency of government. Every time it changes we wait and see if any public service job cuts will follow as the city’s economy takes such a hit from them.
“Essentially it’s like someone hitting pause on the housing market.”
Transport development to keep an eye on
Construction is due to commence this year on what will be the largest-scale public transport infrastructure project Canberra has ever seen – the $783m Capital Metro.
Starting from Gungahlin in the city’s north, the 12km light rail track will run south along Flemington Road, Federal Highway and Northbourne Avenue to Civic (city centre) and possibly onwards to Russell (as part of a proposed future extension), with stops at the suburbs of Harrison, Franklin, Downer and Braddon and major stations proposed for Gungahlin, Dickson and Alinga Street.
A “two to three year construction timetable [is] expected” for the project, according to the ACT government.
Hyde says Gungahlin has "already seen a big increase in infrastructure even before the Capital Metro was announced, and it’s still relatively affordable".
Other Canberra suburbs worth watching
Smith names Dickson, Downer, Lyneham, Kaleen, Giralang, Evatt and Melba as other suburbs that may be worth adding to a property investor's watchlist.
“There is a lot of gentrification going on in these areas, with old houses being replaced by new houses or dual occupancies," she says.
"These suburbs are all an easy commute to major employment hubs and have larger blocks, wider roads and development potential."
As well as Aranda, Gungahlin and other suburbs along the Capital Metro light rail line, there is Crace, the suburb north of Giralang established only seven years ago whose median house price skyrocketed 120% in the five years to September, according to CoreLogic RP Data.
“Houses in family-friendly suburbs close to the major employment precincts will usually be in demand,” Hyde adds.
Where to next?