Canberra anyone?????????

[Shuttergirl]

Is anyone looking at Canberra for investment opportunities at the moment? Would love your thoughts. Ready to buy our 2nd IP and we live in Canberra right now. Rejected Canberra as an area for IPs last year because the rental yields weren't enough to sustain the kind of mortgage that buying here would mean. Rental prices seem to have risen and I'm reconsidering.

I would love to hear from other's that are considering Canberra and why/why not.

 

[Mooze]

Living in Canberra as well and debating it for our 2nd too. Some of the apartments around woden are close to cashflow positive if you push hard enough on price (so about 20k below asking). Few other nice areas coming good as well. Not sure what effect the new Molonglo estate is going to have is key query for us. Canberra in the past has held steady through recessions, due to employment being very good here. Reasons for not, will be areas that do better than it short term in my opinion. But then above is only my opinion, and I'm biased by living here.

 

[tcocaro]

yes

The canberra market has definitely slowed down right now, particularly in the outlying areas (which to canberra folk means 10mins out from city centre - yes sydney people you can now laugh). There is opportunity to be had to purchase in these areas as there is an increase in stressed sales.

Once rates drop then you will see prices increase back to where they where late last year.

For instance a typical 4 bedroom standard house in Gungahlin could have fetched $480k late last year and now could be bought for $460k.

I have also heard of some terraces selling for about $400k which where worth $440k just last year.

So its a good time to buy. In addition rents are good (not sure how you ever came up with bad yields for Canberra) which should put you in an even better position when rates begin to fall.

In terms of growth prospects demand is almost meeting supply so its not the best (e.g. compared to the massive under supply of Sydney\Brisbane) but its still good enough to support prices into the future but I don't see dramatic gains.

In terms of new supply Casey will bring new dwellings to the market but given construction costs are still rising there is opportunity to be had in purchasing say in Gungahlin i.e. an established property vs a new one as well as the possibility for further gains as the town center continues to expand.

There has been a lot said regarding inner ring suburbs such as braddon, dickson etc however given you are looking for a yield\growth balance i dont think these would be in your shortlist.

Hope this has helped someway but please don't misconstrue my advice that as somehow you can get a "deal of a lifetime" you wont. The Canberra market is by no means like the Sydney one i.e. its not as depressed its simple going through a current down-cycle (6-12 month one) which will most likely end in spring - say October which coincides with a usually more buoyant market generally (post winter) but combined with a rate cut should perform well. Therefore right now you could save say 20-40k and perhaps argue for better terms.

Hope this has helped.

 

[Shuttergirl]

Living in Canberra as well and debating it for our 2nd too. Some of the apartments around woden are close to cashflow positive if you push hard enough on price (so about 20k below asking). Few other nice areas coming good as well. Not sure what effect the new Molonglo estate is going to have is key query for us. Canberra in the past has held steady through recessions, due to employment being very good here. Reasons for not, will be areas that do better than it short term in my opinion. But then above is only my opinion, and I'm biased by living here.

Thanks Mooze, I hadn't looked into Woden to be honest but will give it a second look for sure. This would be a long term investment, rather than a short term one so I think Canberra could work for us.

The canberra market has definitely slowed down right now, particularly in the outlying areas (which to canberra folk means 10mins out from city centre - yes sydney people you can now laugh). There is opportunity to be had to purchase in these areas as there is an increase in stressed sales.

Once rates drop then you will see prices increase back to where they where late last year.

For instance a typical 4 bedroom standard house in Gungahlin could have fetched $480k late last year and now could be bought for $460k.

I have also heard of some terraces selling for about $400k which where worth $440k just last year.

So its a good time to buy. In addition rents are good (not sure how you ever came up with bad yields for Canberra) which should put you in an even better position when rates begin to fall.

In terms of growth prospects demand is almost meeting supply so its not the best (e.g. compared to the massive under supply of Sydney\Brisbane) but its still good enough to support prices into the future but I don't see dramatic gains.

In terms of new supply Casey will bring new dwellings to the market but given construction costs are still rising there is opportunity to be had in purchasing say in Gungahlin i.e. an established property vs a new one as well as the possibility for further gains as the town center continues to expand.

There has been a lot said regarding inner ring suburbs such as braddon, dickson etc however given you are looking for a yield\growth balance i dont think these would be in your shortlist.

Hope this has helped someway but please don't misconstrue my advice that as somehow you can get a "deal of a lifetime" you wont. The Canberra market is by no means like the Sydney one i.e. its not as depressed its simple going through a current down-cycle (6-12 month one) which will most likely end in spring - say October which coincides with a usually more buoyant market generally (post winter) but combined with a rate cut should perform well. Therefore right now you could save say 20-40k and perhaps argue for better terms.

Hope this has helped.

I love your joke about the "anything 10 minutes out" thing. I am from Victoria originally and can't get over how much Canberrans hate to travel, even if it's 10 minutes. It has sometimes made running my business challenging that is for sure.

We were thinking of either a 2br unit around Kingston/Griffith way or an older home in Woden. I was leaning towards the 2br unit as the rental returns look quite good and I feel that Canberra really appeals to trendy government employs who enjoy the whole eating out shopping experience of Manuka/Kingston. I'm not sure what impact the Kingston Foreshore will have on all of this though.

Have tossed around the idea of buying something in Woden with a view to either doing a reno or a knockdown in say 5 years. Only trouble is, hubby can't stand renovating and it would all be left to me. And with a flat out business to run quite frankly I'm not sure I would have the time either. Maybe walking into a completely done home would be easier although of course not more cost effective. And I'm not sure whether the rental returns for older homes in Woden justify the big price tag to purchase them.

I hadn't considered Gungahlin either, not sure why really. I might have another look at what's happening out there also.

I really appreciate your comments, and am by no means looking for a deal of a lifetime, just a sound investment.

I would love your thoughts on the 2-3 br unit in Kingston idea............

 

[tcocaro]

kingston

the problem with Kingston is much of the potential growth is gone. It has been redeveloped substantially already and many of the larger developers have already moved in e.g. stocklands, pbs etc.

My suggestion would be to purchase a CORE AREA property in any of the areas you believe is right for you. Given the current slow-down in canberra the builders\developers are not as active and you can get one of these sites for close to the same price as if it wasn't CORE AREA.

Buying a core area block (800+sqm & pref corner block) would give you both a sound investment in terms of the existing dwelling but also the potential to develop in the future (rather than doing a reno).

By having a site with development potential the growth will be more valuable over time than a non-develop able block.

Just some thoughts, good luck with whatever option you choose.

 

[geoffw]

I agree with tcocaro that a lot of growth has gone.

I have a liking for land. There's been discussions in the past- but my own preference is still for a potential cap growth. I'm not sure that a Kingston unit can offer that. There is the demand vs supply vs growth equation- and I suspect that the supply of brand new apartments (still rapidly growing from what I saw today) is rising quickly. I don't know how the demand is going.

My suggestion is to look for a property with multiple streams of income (actual or potential). Inner is better.

I don't know if these still exist.

I bought a property in North Lyneham a few years back with three rentable units- on a 1200sqm block. CF+ from the start, and great development potential.

Friends have bought similar in other areas.

Even without multiple income (actual) there's heaps of potential in older areas, where developers are not currently active, to buy.

A 4BR house, for instance, may have the potential to split.

There's many areas in older suburbs with larger blocks which may have potential.

Sorry to Gungahlin people- but I think that they have already squeezed the maximum out of there, with small blocks and narrow streets.

 

[Shuttergirl]

So your saying that even if I don't want to develop the block myself, buying a block with that potential could make it more valuable when the time comes for me to sell?????

Lots to think about with both of your comments on Kingston. I kind of thought that with the vacancy rate fairly low in Canberra that it would be a good sound investment for me since I am rather new and tentative but maybe it wouldn't be the best choice.

Just having a look through the rental market for say some of my favourite Woden suburbs like Pearce and Mawson and the rest for an older 3 br house are measly at $350ish per week but the properties are more like in the high 400k's to mid $500k's to purchase. I just don't know whether I would want to have to contribute so much of our money into that sort of investment.

Arrrggghhh, this is the bit I hate, trying to decide where to buy, and then what to buy. I know some people enjoy the thrill of the chase, I don't, I enjoy when it's signed sealed and delivered and I can sit back and not think about it for a while, hehehe.

 

[tcocaro]

So your saying that even if I don't want to develop the block myself, buying a block with that potential could make it more valuable when the time comes for me to sell?????

yes. Think of it this way if you purchase a site that can be developed into a dual occupancy you are controlling 2 potential dwellings. This means if the price of houses in that area go up then then in turn means you have 2 potential dwellings that has gone up by that same amount as opposed to just one.

This means that the residual price of the land has gone up substantially as a result i.e. builders\developers are prepared to pay much more because now they know they can sell 2 dwellings for more in the end.

My explanation is rather simplistic but I hope it makes sense for you.

This strategy is called for all intensive purposes land banking but with the benefit of an income stream.

Regarding your comments on yield this is one you will have to answer yourself, that is are you more concerned with yield or growth. However for my part my view is no one has ever got rich of yield. (this comment will have some negative comments to the "cash positive" group and the the yield oriented. BUT.... even they will agree their "strategy" ultimately ends up with having to sell atleast part of the portfolio in the future in order to pay off the loan from the rest.. i.e. they ultimately in the very end still rely on the growth.

Good luck with your decision.....

PS geoffw I agree with you in regards to gungahlin, my previous comments only related to getting something 20-40k cheaper and strong rental vs kingston which you will pay market price and strong rental. (if you ever decide to sell lyneham let me know - is it an amalgamation block? or developable on its own? Any chance is it B11 in the old zoning codes?)

 

[geoffw]

(if you ever decide to sell lyneham let me know

I hope I don't have to.

- is it an amalgamation block? or developable on its own? Any chance is it B11 in the old zoning codes?)

I bought it as an approved dual occ- the previous owner had let out a third bit as a granny flat. I have had it converted to unit title- so I can sell one and keep one if I do. Just doing that added $50k to the value.

Shuttergirl- developing/splitting can be a good strategy. But in Canberra you're more likely able to do it by taking a large house and splitting it for rental. There's a lot of pitfalls in actually developing in Canberra, and in many places, you will not be able to do it.

 

[contrary]

mooze, I disagree that canberra does well in recessions. It is actually more leveraged to the economic cycle.

I had a house in Canberra, in Lyons, one that we did a subdiv, built second house on a large block in 1988, after contruction costs the yield was over 15%. It was impossible to sell either of these or a house we had in curtin in mid 92 when we moved from CAnberra, there was seriously no one buying. We had them on the market for 18 months. We eventually pinged the market agin and sold in 1995.

A substantial proportion of the population were (still are?) federal public servants. When there is a recession, the federal budget goes into deficit and the first thing they do is slash spending. When this happens there are less bureacrats needed. There also a negative effect from self government in the early 90's but I think that was not the main factor.

Canberra has high average incomes though and could support higher prices. It does from my experience however experience the economic cycle in a magnified form so be careful of that.

 

[Shuttergirl]

Geoff, I couldn't possibly develop and split a place. Just reading you saying that made my head swim with stress hahaha.

I would think if I am honest with myself I am conservative, very new to this and would feel more comfortable buying something simple and with good rental potential and steady/good CG over the long term. Boring, but I gotta sleep at night I guess.

Hmmmm, so hard. I think Sydney might be the go at the moment actually but haven't the foggiest where to start on this. Have been having a look around but really I don't know what is a nice area, what isn't and to make such a huge mistake would be devastating not only to my confidence but to my bottom line.

Why is this 2nd IP feeling so much harder than the first? I thought it would get easier each time to be honest.

 

[jingo]

Living in Canberra as well and debating it for our 2nd too. Some of the apartments around woden are close to cashflow positive if you push hard enough on price (so about 20k below asking).

What do you guys think of Phillip in Woden? From my own observations it is close to the hospital and also the Woden shopping centre (in between). Would the area attract tenants who work in the hospital??


Regards Jason.

 

[Mooze]

You'd probably get a few. One thing is there are several very large new apartment complexes slated for that area starting very soon. including Lyons and East Woden

 

[namtrak]

A 2/3 br unit in Kingston/Griffith would be some serious coin, and I imagine that you would be paying for a price rise which in a lot of cases has already vanished.

Im not sure that Phillip has that much housing? Its mainly car yards and such isnt it? Possibly some units and such I suppose.

I like Queanbeyan as an area to invest, particularly the 3/4 blocks either side of the main street - but they are real hens teeth. I think it is only a matter of time before the main street is completely revamped and a traffic bypass is created. Queanbeyan will really come into its own then. I also think there are some top floor units near the main street which may lend themselves to quality makeovers.

 

[mystery]

A 2/3 br unit in Kingston/Griffith would be some serious coin, and I imagine that you would be paying for a price rise which in a lot of cases has already vanished.

Im not sure that Phillip has that much housing? Its mainly car yards and such isnt it? Possibly some units and such I suppose.

I like Queanbeyan as an area to invest, particularly the 3/4 blocks either side of the main street - but they are real hens teeth. I think it is only a matter of time before the main street is completely revamped and a traffic bypass is created. Queanbeyan will really come into its own then. I also think there are some top floor units near the main street which may lend themselves to quality makeovers.

We bought an IP in Queanbeyan earlier this year, .... just an old one bed flat, .. which only cost us $119k .... and we get $150 pw rent. I don't mind the Queanbeyan area, ..... it's only about 9km to the CBD and only a short drive to Fyshwick.

Queanbeyan is much closer to Canberra CBD than many outer suburbs in the ACT, but at a fraction of the price. Okay, it's not as trendy and the inner suburbs like Kingston, Manuka etc, but as a low cost entry point for some investors wanting to stick their toe in the IP water, then it's not a bad place to consider and vacancies are very, very tight.

Martin