Investing in Canberra – striking a balance
As well as the needs of owner-occupiers, investment demand requires attention to ensure that an increased level of interest in Canberra does not see first-time buyers caught up in excessive house price growth, due to lack of supply.
Over the past twelve months, Canberra’s proportion of housing finance, for the purpose of investment, averaged 34.2% of total housing finance commitments and reached a height of 39.0% in April of this year.
While this percentage encompasses both new and established dwellings – as a proportion of total housing finance commitments – residential investment in the Canberra market in 2017 has already reached 2,283 dwellings, and based on current data should total just over 4000 properties for the year.
When investing in Canberra, key economic drivers should offer clues to the locations and products set to provide the greatest interest. Investors and owner-occupiers alike should consider the purchasing decisions they make now and assess demand for their property in the future, if long-term investment is a goal.
Studios, apartments and smaller townhouses are a popular choice because they are more affordable to purchase and can be priced competitively for rent. They also lend themselves nicely to Canberra’s expandable population brought about by government employment, increased labor demand for infrastructure projects and tourism.
According to Sue Maloney, who operates Accommodate with her husband Peter, as part of Maloney’s Property, there is a greater appetite for short-to-median term rentals which offer an alternative to hotels in central areas of Canberra.
“While demand is cyclical for obvious reasons, during sitting weeks and major events such as Floriade, we are fully booked.”
For those looking for specific indicators when making an investment decision, Sue highlights the jobs market and growth in this area as a key driver of rental demand.
Another consideration should be overseas migration. Of the 63,568 new Canberrans who will call the capital home in the next 10 years, nearly 30,000 people or 44.0% are expected to have migrated from overseas. Canberra is considered regional for the purpose of skilled migration, which makes it an ideal destination for those looking to establish foundations in a new Australian city.
Discussing this topic with Sue, she says that the rental demand that migration brings is predominantly price driven.
“Migration can be a very sensitive price bracket – people moving to Canberra from overseas are not likely to look at the top end of the market and will be very much driven by affordability.”
As well as jobs growth and migration, Canberra is an ageing population – while vibrant and young now, with a median age under 40, within less than 50 years, 22.5% of our population is expected to be over the age of 65.
While a proportion of this age group may own their own home, many will not and, in addition to aged care facilities, will need to look to the private rental market for accommodation. That means ensuring that a proportion of what we are planning and building for the future is appropriate for downsizers and ageing Canberra.
“Downsizers still want space which often comes in the form of a townhouse. They are looking for a floorplan that effectively reflects a shrunken house but retains the large master bedroom. It is currently a challenge to find products in Canberra that suit people into their downsizing years,” Sue said.
The key takeaway from my conversation with Sue is that the rule of investment in Canberra is to keep it central, as with most capital cities. The majority of the market want the ability to live within walking and driving distance to education, medical, government and retail facilities that are specific to their needs and provide a level of affordability.
ABS data highlights that Canberra needs to work hard to keep up with supply but diversity, appropriateness and quality of product should be a focus – what we need is just as important as how much we need to avoid an oversupply of housing products that don’t meet the market.
When designing new developments, consideration should be given to homes that provide flexibility and generality, such as those without stairs, main living areas on one level, multigenerational living options, adaptability, and access to in-home services, which promote communication and independence and the ability to identify with like-minded people through access to community.
Building on Sue Maloney’s recommendations for Kingston and Braddon as key areas for investment, the Belconnen Town Centre, Dickson and their surrounding suburbs are locations with the ability to meet the needs of our changing population. Both support multiculturalism and community, offer accessibility to the aforementioned facilities and have a strong framework for infrastructure and neighborhood.
References: RP Data Core Logic, The Real Estate Institute of Australia (REIA), Australian Bureau of Statistics (ABS), SQM Research, Government; Chief Minister & Cabinet and Invest in Canberra.