As Sydney market fades Canberra gains strength: Terry Ryder

The Canberra market continues to look stronger and is rising as Sydney is fading.

The ACT took some time to join the party, and its conditions remain somewhat less than a “boom”, but are becoming increasingly buoyant.  All indicators - sales activity, price growth, rental growth and vacancies - indicate a market that’s trending upwards.

Having previously been hampered by downsizing in the public service and a unit oversupply, the Canberra showed signs of rising in 2014, when total residential sales increased to 9,200 from 8,590 the year before. Sales rose further to 9,829 in 2015 and the market has remained busy ever since.

Total residential sales volumes have been rising over the past two years. In 2012, 2013 and most of 2014, every quarter recorded residential sales below 2,300 - but since late 2014 most quarters have been above 2,400 sales.

This has occurred on the back of an improving economy (recently ranked No.2 in the nation behind NSW by CommSec), low unemployment and high average incomes.

The greatest strength has been in the housing market, with sales activity in the apartment market falling away last year.

As a result, the most positive statistics on prices and rents are being seen in the housing market, and much less so in the apartment market.

The latest figures from SQM Research suggest a 13 percent annual rise in house prices and a 4 percent rise of units. CoreLogic’s latest data says houses are up 10 percent and units 7 percent.

The Canberra figures for house price growth are bettered only by Melbourne and Sydney.

The national capital is also the national leader on rental growth, helped by very low vacancy rates. Both SQM and Domain suggest vacancies are consistently around 1percent (only Hobart is lower among the capital cities).

SQM says rents are up 7 percent for houses and 2 percent for units, while Domain reports 6 percent growth for houses and 5 percent for units.

Median rental yields are 4.1 percent for houses (compared to 2.8 percent in Sydney and 2.6 percent in Melbourne) and 5.1 percent for apartments.

Overall, as I have often commented, the standout characteristic of Canberra is the steadiness of its performance. I sometimes refer to it as the Goldilocks of Australian real estate: not too hot, not too cold, just right.

That, plus the low vacancies and the growth numbers now emerging, make the national capital increasingly appealing for investors.

Another predictable factor in the ACT market is the predominance of the northern part of the city in terms of growth markets.

While there are now growth suburbs across the Canberra metropolitan area, the strongest precincts once again are the Belconnen and Gungahlin districts in the north.

In the latest Hotspotting research for The Price Predictor Index, we have identified 18 Canberra suburbs with rising markets and nine of those are in the Belconnen and Gungahlin areas.

Belconnen (six growth suburbs) has taken over from Gungahlin (three) as the clear market leader.

Suburbs with rising markets in the Belconnen District include Flynn, Bruce, Florey, Holt, Macgregor and Evatt. Bruce, where house sales have risen from 38 to 41 to 44 to 54 in the past four consecutive quarters, is typical of the suburbs that are rising.

There are growth markets elsewhere as well, including in the Tuggeranong and Inner South precincts of the city. 

Terry Ryder is the founder of hotspotting.com.au. You can email him or follow him on Twitter.