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Monday, January 25, 2021

Residential property on track to deliver exceptional returns: Weekly market wrap with Sam Dodimead

Residential property on track to deliver exceptional returns

Monthly Home Value Index figures reported by CoreLogic showed increases to values of both units and houses. Collective growth in September, October and November reflected values of units increased by 2.5% and houses 3.5%. These rates annualised show residential property in Canberra is on track to deliver exceptional returns to owners.

Property owners are enjoying an environment where interest paid on mortgages is calculated at the lowest rates in history, significantly reducing barriers of entry for investment. Those choosing to invest in residential property have found vacancy rates have remained low throughout 2020. SQM Research figures show vacancy rates peaked at 1.3% in May and are currently sitting at 0.9%. For perspective, this means occupancy rates are 99.1%. This dynamic has been steadily applying upward pressure on asking rents for units, which have increased by 2.4% year-on-year to October 2020.

The value of purchasing off-plan is amplified in a market where both property values and rents are rising. Purchasers can lock in a price immediately upon exchange of contracts and secure exposure to the market without the burden of holding costs like having to pay interest, strata levies, rates or land tax until settlement occurs. Across the portfolio of off-plan projects I am working on, interstate investors have been active, however, account for marginal transaction volumes in comparison to local owner occupiers.

Vendors remain confident with market conditions

In the established market, it is clear vendors remain confident with market conditions. Domain reported on Saturday 5 December the preliminary auction clearance rate was 72% from 72 scheduled auctions. Greater numbers of scheduled auctions have correlated with clearance rates moderating from their peak on 14 November. Individual sales results for properties sold either under the hammer or prior to auction show buyers are comfortable paying what appear to be ambitious figures, including many new suburb records. I anticipate demand from buyers seeking to receive the $25,000 HomeBuilder Grant will continue right up until the end of 2020, inevitably resulting in some purchasers costing themselves $10,000 because they were unable to act decisively. Every day of decision delay makes it increasingly challenging to exchange contracts by the deadline to qualify, placing an enormous amount of pressure on professionals working in this space to deliver required outcomes in very compressed timeframes.

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.   

Find property listings at Canberra Weekly Real Estate.

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