Canberra residential market in a stable position: HTW residential

Canberra residential market in a stable position: HTW residential
Staff reporterDecember 7, 2020

The Canberra property market has been in a stable market position from the end of 2018 to early 2019, according to a recent Herron Todd White (HTW) report. 

The valuation firm took a look at rental yields across the nation. 

The HTW report notes most Canberra suburbs have maintained median price points for standard dwellings while medium density and unit stock have seen some small declines.

Active sections of the market include standard housing at the entry level price point in some of Canberra’s fringe and outer suburban locations.

Generally purchases are looking for large blocks within established suburbs that provide access to good education and employment services.

Entry level price points for this style of housing range between $550,000 and $650,000.

"Most homes within this section of the market provide three and four-bedroom accommodation, generally 30 to 60 years old and in many cases the dwellings are ready for some renovation and upgrading," the valuation firm said. 

Inner suburban locations in Canberra’s north and south set a higher price point, generally $1 million-plus.

This section of the market is also relatively stable with families looking to move up the property ladder with their second or third acquisition.

"Again block size, location and proximity to schools and other services are the main drivers," the valuation firm stated.

This section of the market ranges from $1 million to around $3 million.

The report notes market activity for property in the $3 million-plus price point is slower, with buyers generally more discerning.

Location, block size, build quality and level of inclusions are major factors influencing this section of the market.

Price points in the medium density unit market range from $200,000 to $275,00 for a one- bedroom unit recently constructed in a fringe town centre location to $400,000 to $500,000 for a centrally located unit in Canberra’s inner north or inner south.

"Both investors and owner-occupiers are active, however strong supply in the medium density market has had an impact on activity," the valuation firm commented. 

Being in close proximity to or directly in town centres including Tuggeranong, Woden, Canberra City, Belconnen or Gungahlin is important for rental return, low vacancy and potential future growth.

"The Canberra residential market has always been attractive to investors seeking high yielding properties.

"The traditionally strong rental market is driven by a low vacancy rate, strong demand for rental accommodation, above average income levels and a transient population comprising professionals, government workers and staffers, students, embassy occupants and defence personnel," the valuation firm said. 

High yields in the range between 5% and 6% gross can be achieved.

Lower yields in properties suited to achieving capital gains range between 3% and 4% gross.

High yields can be achieved in the unit market where professionals, students and government workers are looking for modern accommodation, centrally located in proximity to both work and amenities.

A one-bedroom modern unit at $450,000 can achieve $500 per week equating to 5.7% return gross.

The weekly rental can be increased by including furnishings. Suburbs that provide this style of accommodation include Barton, Kingston and Forrest, the report noted. 

Families seeking rental accommodation can also provide a high yielding option.

A suburban family home in an outer suburb in close proximity to schools and amenities at $700,000 can achieve $700 per week equating to 5.2% return gross.

"Unique to Canberra is the prestige Embassy market. Traditionally, prestige properties have a rental income ceiling and as values increase gross returns diminish," the valuation firm said. 

An exception is the Embassy market where above market rents will be paid on long term leases to obtain and occupy large executive style dwellings.

The Canberra embassy precincts include O’Malley and Yarralumla where high rents can be achieved providing returns in the range of 5% to 6% gross.

It should be noted that gross rental returns need to be adjusted with residential properties in the ACT subject to land tax.

"A long term government strategy is to abolish stamp duty and as a result, land tax and rates have increased, eating into investor returns.

"Another unique factor of the ACT investor market is the ability to claim stamp duty as a tax deduction when purchasing a residential property to lease." 

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