Exceptionally low interest rates and the strong local economy have led to a significant increase in the number of people considering investing in properties located in Canberra. Local and interstate investors are seeing opportunities to expand their portfolios and increase exposure to Canberra’s property market. Reflecting on the last six months and comparing the experience of most Canberrans with people living in other capital cities, it is easy to see the attractiveness of Canberra’s investment proposition.
Vacancy is one of the biggest risks to investing in property. If an investor borrows money to fund the purchase, they require income to service the debt. In Canberra, rental vacancy is typically nominal, however, in May this year SQM Research reported it increased to 1.3% from 0.9% in March. All things considered, this was an exceptional result for those investing in Canberra.
SQM Research has recently revealed the national residential rental vacancy rate recorded a decrease over the month of August, from 2.1% in July to 2.0% in August. The total number of vacancies Australia-wide is now at 69,971 vacant residential properties. This time last year, the national vacancy rate was slightly higher at 2.2%.
All capital cities recorded declines in vacancy rates over the month except for Melbourne, which again recorded an increase from 3.1% in July to 3.4% in August. There are now an extra 2,145 vacant properties in Melbourne as the stage 4 COVID-19 lockdown continues.
Sydney currently still has the highest vacancy rate in the nation of 3.5%, having declined by 0.1% from July. Hobart’s vacancy rate is the lowest in the nation at 0.7%, with Canberra recording 0.8%.
Louis Christopher, Managing Director of SQM Research, said “the shift towards regional living continues at pace, largely at the expense of higher inner-city rental vacancy rates”.
“I suspect there will have to be a high point in this move soon. However, I also suspect there will be a degree of permanency with the massive population shift. Meanwhile Sydney and Melbourne rents continue to fall, providing leasing opportunities for tenants who have chosen to stay in town.”
SQM Research reported throughout 2020 gross rental yields in Canberra have reduced from 5.8% to 5.6% for units, however houses increased from 4% to 4.1%. Recently the growth rate of asking rents has shifted in favour of units, seeing asking rents increase by 1.6% during the last quarter to $474.30.
Supply of new listings is down 11.3% year-on-year to August, minimising another risk for investors and posing a quandary: without an increase in supply, where do we house people once interstate and overseas migration resumes? Market dynamics for property investors appear quite favourable. Canberra’s occupancy rate is 99.2%, offering gross rental yields exceeding 4.1%, all whilst borrowers can secure debt at historically low levels.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward deliver of new buildings. Stream from wherever you listen to podcasts.
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