Thoughts on Canberra and the ACT

Hey Team,
Following on from the discussion in the other thread over the last few weeks regarding Canberra's falling rental market, where do you think we're headed in regards to property values?

I'm an owner of 2 properties (and very likely soon to be more). So, I've got an interest in this.

Random thoughts/observations from me over the last few years up until the present...

From my observations, Canberra has been basically flat for 5 years. My PPOR here - I purchased for 400k in 2009. I've done a bunch of renos/GF addition, but had I not done that and it was in the condition I bought it in - I think it would sell for maybe 440-450k now. So, basically in line with inflation.

Reasons for it being flat for 5-ish years? Lots of new developments, change of government, property overvalued in the first place?....etc.

Quick note on rents - The 2010 rental crisis was a bit of a golden time for me, I was easily getting $180 per room from my other housemates, now I'm charging $140. Reasons for the rental market "crash" - lots of new apartments and suburbs etc as discussed in our other thread.

Anyway, whats happened is in the past and although we've not experienced any growth at all, I've still done well and am not complaining. So lets not worry too much about that - lets think about where we're headed.

I went to Steve McKnight's seminar here late last year - he predicted Canberra to be flat/fall for another 2 years, and didn't recommend buying here in the near future (simplified).

I remember some people predicting a 20% or so drop here after the change of government. It hasn't really eventuated? Or has it, and we've just not heard about it? A friend of mine who is a RE agent has said to me that he thinks he's selling places now for $400k that would have been $450k a year ago.

He also said that older stand alone houses (think older suburbs of belconnen etc) he predicts will be in higher and higher demand in the future, as all thats getting built now are either apartments, townhouses, or houses on tiny blocks that look the same as every other house in the street (crace, gunghalin etc).

Personally (not that it matters in the slightest), as I'm going to be a net buyer in the ACT in the next few years, I wouldn't be upset at all to see a further period of no growth. I think long term, being the nations capital and a somewhat "artificial" economy due to the government and public service, we're destined for long term stable growth at least in line with inflation or slightly more.

Where are we headed in the next 2 years? 5 years? Have we felt the public service layoff effects yet? Whats going to happen with the old suburbs with established housing? Whats going to happen with the new suburbs? Will there be a local boom if Labor happens to win the election and makes the ups the public service numbers again?

Look foward to hearing the thoughts from the other Canberra locals and everyone else :)
 
my personal opinion - I'd:

1) diversify into other locations
2) wait maybe 2 years before considering Canberra again. It is usually a cycle thing. new Govt comes in, cleans the slate, and then after a while the spending creeps up and up, and along with that Canberra's prosperity.

I live in Cbra, have my PPOR here, investment properties - all outside of ACT
 
I would personally diversify... this might prevent any problems with serviceability for future loans. I also suspect that governments will start to look at outsourcing functions to regional towns to provide employment where manufacturing/alternatives are limited. One easy example I can think of was moving the call centres to Cooma to buy votes... oops, I mean because it 'made financial sense'

Having said that, I think if you wanted to buy in Canberra now is the time, while sentiment is a bit down.
 
I would personally diversify... this might prevent any problems with serviceability for future loans. I also suspect that governments will start to look at outsourcing functions to regional towns to provide employment where manufacturing/alternatives are limited. One easy example I can think of was moving the call centres to Cooma to buy votes... oops, I mean because it 'made financial sense'

Having said that, I think if you wanted to buy in Canberra now is the time, while sentiment is a bit down.

Yeah, I've got 2 properties in NSW also, so I'm semi-diversified I guess. My main strategy is to buy and reno, and having a place within driving distance just makes life a million times easier.

Whats everyones crystal balls saying?
 
Having said that, I think if you wanted to buy in Canberra now is the time, while sentiment is a bit down.

Exactly my thoughts.

Canberra goes through cycles - it's been flat for a while due to an abundance of new stock and uncertainty with the Govt.

It will pick up again - and when it does, buyers will be flooding open homes, throwing offer sheets around and driving up prices.

I'd rather buy at a time like now - I'm also a business owner in the ACT so my input probably comes across as biased as I have a vested interest in the property market doing well.

Cheers

Jamie
 
If you are buying cheap, and you are after a longterm investment, then I think Canberra's current stagnation is a bit of a non issue. Prior to this we had HUGE rapid growth. The kind that cannot be maintained forever. I think buyers are in a good position at the moment, glad I'm not a seller though. And it's not so great as an owner if you are needing a revaluation for financing.
 
Canberra market is not ideal at the moment. Market will pick up. The question is how long.

Rental market is a worry. Seems you have your strategy to rent out and still good to have enough cash to cover in case not tenanted.
 
I think it depends very much on where you buy... in a downturn, people will still want to live in the inner city for the amenities and convenience to work, while the outer suburbs *may* (note, I'm not dissing people who may have other strategies) struggle. So I think it's important to understand the cyclical nature of Canberra's employment market before buying. Personally, in the north I'd never buy further out than Watson/Lyneham if I could afford it; perhaps Kaleen and Bruce at a stretch though that tiny green belt is a psychological barrier. For the south, Garran/Hughes/Curtin are where I think you get the best compromise, although Narrabundah also has plenty of promise. If you want cheap but convenient, Queanbeyan/Crestwood/Jerra is an option, although I think you need to be a lot more savvy to identify what's an opportunity and what's a dog.
 
I agree, I think you can definately guard against some of the variabilty with location. I can't imagine an apartment at foreshore is going to suffer anywhere near as much as a place in say harrisson.
 
Its a bit rough out there now. I really think its tied to the fiscal situation, not the government. The labor government have been slashing jobs for years before the liberals came in too.

Tackling the public service is always going to be one of the low hanging fruits in a fiscal consolidation period.

Noting that, i'm not so sure about the timing of any recovery. Will it be after 2 years, or longer?

There's also serious supply coming onto the market over the next couple years. That could take a little while to soak once the market does recover.

Agree with diversifying areas within ACT. From my experience, last place i rented in the City had 1 bedders fall from 415 to about 365 now. Contrastingly, havent noticed any falls at the Foreshore.

Many many investors have made thousands buying in these type of conditions though - lots of opportunity in glum markets and negotiating power is with the buyer.
 
I have properties in Canberra and in Melbourne. My Cbra properties have outperformed my Mlb properties by a mile, and then some. I like to buy in areas that I am familiar with. I have three in the inner south and I don't believe I would have got the same capital growth anywhere else in Australia.

I have been here for nearly 30 years. The Hawke-Keating years saw prices make some slight moves. Self-government was then foisted upon us. The Howard years saw prices drop--Griffith houses averaged $250,000; Narrabundah houses $120,000--and even then they weren't selling. Luckily, that was when we bought. Then, with another change of government prices soared, and kept soaring. We were due for a correction.

I know there are the nay sayers, but I still believe that prices will rise again with a change of government. I say that only from experience.
 
He also said that older stand alone houses (think older suburbs of belconnen etc) he predicts will be in higher and higher demand in the future, as all thats getting built now are either apartments, townhouses, or houses on tiny blocks that look the same as every other house in the street (crace, gunghalin etc).

Rohan, I agree with the above: it is the land that is valuable. If you can afford it buy a house rather than apartment.
 
Griffith houses averaged $250,000; Narrabundah houses $120,000--and even then they weren't selling. Luckily, that was when we bought. Then, with another change of government prices soared, and kept soaring. We were due for a correction.

I know there are the nay sayers, but I still believe that prices will rise again with a change of government. I say that only from experience.

Damn, I wish. If you wanted a 'cheaper' area with a decent amount of land content and good opportunity then I always like to look in Narrabundah. I just can't help but think of the convenience to bike paths (which I used a lot in Canberra), decent block size, proximity to Kingston etc. and still affordable.
 
The Howard years saw prices drop--Griffith houses averaged $250,000; Narrabundah houses $120,000--and even then they weren't selling. Luckily, that was when we bought. Then, with another change of government prices soared, and kept soaring. We were due for a correction.

Well done PG. The inner south is a great area - I've only ever known the Griffith market for having $1m homes :)

I know there are the nay sayers, but I still believe that prices will rise again with a change of government. I say that only from experience.
I agree - I don't have any fancy graphs or insightful facts but this is part of a cycle. We had exponential growth post GFC that couldn't be sustained forever (20% in one year) and now we've been stagnant for a few years which has also be fueled by a change in Govt. and lots of OTP stock.

Canberra will be fine - especially for those like yourself who have purchased in sought after, established suburbs near the CBD.

Cheers

Jamie
 
Damn, I wish. If you wanted a 'cheaper' area with a decent amount of land content and good opportunity then I always like to look in Narrabundah. I just can't help but think of the convenience to bike paths (which I used a lot in Canberra), decent block size, proximity to Kingston etc. and still affordable.

Me too--I wish I had bought more then. My first place in Canberra was a new unit purchased in Kingston for $165,000. Cheap.
 
... The inner south is a great area - I've only ever known the Griffith market for having $1m homes :) ...

I know. It's ridiculous. At it's height, a couple of knockdowns sold at more than $1m. I'm not sure that they're getting that price now though. It makes me feel sorry for first home buyers.
 
I know. It's ridiculous. At it's height, a couple of knockdowns sold at more than $1m. I'm not sure that they're getting that price now though. It makes me feel sorry for first home buyers.

Yep - my dad has an old ex-govy place out there on a massive block....the house isn't worth a lot but the land content alone would be worth heaps. It is a lovely area though - I can see why it's a desirable place to live.

Cheers

Jamie
 
I have properties in Canberra and in Melbourne. My Cbra properties have outperformed my Mlb properties by a mile, and then some. I like to buy in areas that I am familiar with. I have three in the inner south and I don't believe I would have got the same capital growth anywhere else in Australia.

I have been here for nearly 30 years. The Hawke-Keating years saw prices make some slight moves. Self-government was then foisted upon us. The Howard years saw prices drop--Griffith houses averaged $250,000; Narrabundah houses $120,000--and even then they weren't selling. Luckily, that was when we bought. Then, with another change of government prices soared, and kept soaring. We were due for a correction.

I know there are the nay sayers, but I still believe that prices will rise again with a change of government. I say that only from experience.

Thanks propertygirl, appreciate the insight. I moved down to Cbr a few years ago and have only really seen a slowish market. Don't have much experience of the cycles to go by and have been making my own observations, without much actual experience over time.
 
ive got PPOR and an investment. the investment is an ex govvy in belco....what i hate is the rates / land tax. 4k a year when rent is 20k ish....i know you may say thats small relative to potential cap gains..but still...dont think i would buy another in ACT again for that reason..(plenty of other good areas)..no doubt rates/land tax will continue to rise at excessive rates to pay for that silly cho choo train....

Imo house prices will drop over the next year or two...decreasing rents showing no signs on stopping (yes a general view)...Jamie might correct me, but that has to lower investor activity/demand.

Hope im wrong...time will tell
 
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