Government activity and rental demand keep Canberra on a high despite decentralisation concerns and rising prices

Investors keep on flocking to Canberra, which offers stability and reasonable growth potential.

“Canberra is essentially driven by government activity. It is a lovely place, and it’s a city that was created to be in between Sydney and Melbourne for particular reasons. The more people you have in government, the more Canberra is going to profit. We’ll always have a government based in Canberra,” says Multifocus Properties & Finance CEO Philippe Brach.

With this economic driver, Brach believes Canberra is a good alternative to markets on the east coast, like Sydney and Melbourne. As a result, price growth in Canberra is now the second strongest across the country.

“The type of property that people want to live in in Canberra can range from apartments to big homes. It really reflects the fact that it is a government city, and lots of people move there because they’ve got jobs in government,” says REA Group chief economist Nerida Conisbee.

“Demand from buyers remains fairly average, not super strong. We do see strong rental demand– from an investor’s perspective, you probably wouldn’t be stuck for tenants.”

Focus on the government could be make or break

With the majority of demand coming from people in government, a shake-up in the location of government departments could take a toll.

“There has been talk of decentralisation of government departments in Canberra to reach the northern part of Australia – it could have a pretty strong detrimental impact on the Canberra market,” Conisbee states.

“That’s probably the biggest risk factor at the moment in the market. It depends on what they do, the scale of what they’re proposing. It’s something you do need to look at if you’re looking to invest in that location.”

If only a few departments are relocated, the effect on the market is expected to be minimal; however, if many jobs will be uprooted, Canberra could be badly shaken.

Nonetheless, apartments near schools like the University of Canberra and the Australian National University should still be profitable investments, as would apartments near city centres like Woden and Belconnen.

“If property investors are chasing yields and not capital growth, purchasing a new apartment may be a good option,” states Herron Todd White in its Month in Review report for August 2017.

However, HTW warns that areas like Tuggeranong and Gungahlin could be expecting to see low growth in the next few years as a result of excessive supply.

SUBURB TO WATCH

DICKSON: High rents provide investment opportunities

Despite median house prices remaining around the $765,000 mark, this Canberra suburb offers a potentially lucrative opportunity for investors, who can expect to charge a rental rate of $525.

Prices reflect the fact that the suburb is within walking distance of the CBD, while also being home to the ABC radio and television studio, a large shopping centre and a number of large playing fields.

Houses have seen a significant rise in value over the past few years, climbing 5.2% over the last 12 months and 25.9% over the past three years. Units, on the other hand, have been steadier, showing a 4.2% increase over the past 12 months and 5.3% growth over three years.

Returns: The median weekly advertised rent for a house is $525

Location: Dickson is just 4km from the Canberra CBD