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Exploring the Canberra Property Market in 2024

January 5, 2024
Canberra Rental Market in 2023

Key takeaways:

  • Canberra’s property market has seen impressive growth over the past year due to population expansion, restricted availability, increasing construction expenditures and strong household incomes.
  • The Reserve Bank of Australia’s decision to increase the cash rate target has implications for Canberra’s property market, with investors needing to be aware of potential risks associated with such decisions.
  • Population growth and government initiatives are driving a thriving rental market in Canberra while infrastructure projects present promising investment opportunities for those looking into investing in the area.

The Canberra property market has experienced significant growth in recent years, presenting both opportunities and challenges for investors.

With a strong rental market, increasing housing prices, and various government initiatives in play, the time is ripe for examining the factors driving this growth and how they may shape the market in the years to come.

In this post, we will delve into the current state of the Canberra property market, discuss the impact of interest rates, and explore the long-term outlook for this thriving capital city. If you’re looking to buy property in Australia or Canberra, this will help you get some perspective on the local market.

Expand Your Horizons: If Canberra is on your radar, our definitive guide on buy a house in Canberra is the perfect companion to your current reading.

Canberra’s Property Market Performance

The latest data indicates a moderate recovery in Canberra’s property market. The median house price has increased by 1.8% to $1,042,730, while unit prices have declined by 0.6%, reaching $567,059. This marks a period of stabilization following significant fluctuations during the pandemic.

Factors driving this market growth include population expansion, restricted availability, augmenting construction expenditures, and robust household incomes.

The market dynamics indicate that units have become a popular choice among buyers, particularly one-bedroom apartments which are appealing due to their lower price points. This trend is driven by affordability concerns, as well as an increase in the number of first-home buyers entering the market, who are typically looking for more budget-friendly options.

Capital City Comparison

Canberra Property Market

Early 2024 sees varied median house and unit prices in Australian capitals. Canberra’s median house price is $1,050,575, and the unit price is $554,266, showing its strong market position. In contrast, Sydney’s and Melbourne’s prices are higher.

Brisbane and Adelaide’s markets are growing, with Brisbane’s median house price at $875,991. Overall, Canberra stands out in Australia’s dynamic property market, especially in house prices.

Factors Driving Canberra’s Market

Several factors are influencing Canberra’s property market, with population growth being a significant driver. As more people move to the area, demand for housing increases, which in turn can result in higher house prices. A lack of supply can also contribute to price increases, as limited availability of properties drives competition among buyers.

Adding to this pressure, increasing construction costs can lead to higher house prices, as developers pass these costs onto purchasers. Robust household incomes, on the other hand, can fuel greater demand for housing, potentially leading to price increases.

Overall, these factors combine to create a dynamic market in Canberra, where prices are subject to various influences.

Interest Rates and Their Impact on Canberra’s Market

Interest rates play a pivotal role in shaping Canberra’s property market. At the time of writing, the Reserve Bank of Australia has raised the cash rate 12 times and most recently, to 4.10% due to high inflation and tight labour markets. This has had an impact on the nascent housing market recovery.

It is anticipated that interest rates will reach their highest point soon, but a substantial increase in prices is not expected in the immediate future.

At present, consumer confidence remains low, and many prospective homebuyers and investors are yet to take action. However, factors such as housing demand, supply, and the course of interest rates are likely to have a significant impact on the trajectory of home prices in the future.

Reserve Bank Decisions

When the RBA decided to begin increasing the cash rate in May 2022, the decision had potential ramifications on Canberra’s property market by making borrowing more expensive and potentially decelerating the market.

Predicting future interest rates can be challenging, yet economists anticipate the Reserve Bank’s rate increases might reach a peak this year and begin to drop in 2024. So, it seems the property market might rebound.

Property investors should be cognizant of the potential risks associated with rising interest rates, such as increased borrowing costs and decreased demand for property.

Understanding the implications of the Reserve Bank’s decisions is crucial for investors as they navigate Canberra’s property market.

Interest Rate Rises and Property Prices

Increases in interest rates can diminish borrowing power and significantly augment minimum repayments, consequently causing a decrease in property prices. While interest rates have been increasing, they are only one of the many factors influencing home prices in Canberra.

Other factors, such as population growth, infrastructure projects, and government initiatives, can also impact property prices. As rates continue to rise, investors must closely monitor these developments and adjust their strategies accordingly to achieve success in Canberra’s property market.

Predictions for Future Interest Rates

Predictions from the big four banks in Australia suggest that the cash rate reached its peak of 4.10% in June 2023, and should decline to approximately 2.60% by August 2024.

This anticipated peak and subsequent decrease in the cash rate may have implications for property prices and investor strategies in the coming years.

Being aware of these predictions and adjusting investment plans accordingly can help investors navigate Canberra’s property market amidst fluctuating interest rates.

Canberra’s Rental Market Landscape

Apartment for sale in Mawson ACT

Canberra’s rental market is currently strong, boasting a vacancy rate of 1.4% and rental yields rising to 4.19%. Certain areas in the south, such as Mawson and Hawker, demonstrate promising rental yields, while luxury units appeal to high-earning Canberrans who seek premium living experiences.

This robust rental market presents opportunities for investors looking to capitalise on rental income in a thriving capital city.

Vacancy Rates and Rental Demand

The current vacancy rate in Canberra’s rental market stands at 1.4%, indicating a strong demand for rental properties. Factors contributing to rental demand in Canberra include population growth, infrastructure projects, and government initiatives.

Interest rates also have a considerable effect on rental demand in Canberra, as they can affect the cost of borrowing and the availability of credit.

As Canberra’s population continues to grow and infrastructure projects develop, the demand for rental properties is expected to increase, thereby maintaining a strong rental market. Investors should monitor these factors closely when considering investment opportunities in Canberra’s rental market.

Rental Yields in Canberra

Rental yields in Canberra refer to the return on investment for rental properties in the area, calculated by taking the annual rental income and dividing it by the purchase price of the property. The median rental yield for houses in Canberra is 3.62%, while the present gross rental yield across all dwelling types is 3.76%.

Suburbs such as Chifley, Curtin, Harrison, Mawson, and Lyons offer the highest rental returns for units in Canberra.

These high-performing suburbs present attractive opportunities for investors seeking to capitalize on Canberra’s strong rental market.

Housing Values and Rental Markets

Canberra continues to be the most expensive capital city to rent a house in, with median weekly rents amounting to $690. The median rental average for all dwellings in Canberra is $633 per week, representing a 1.5% increase from the preceding quarter. Finding cheap rentals in Canberra is about as hard as doing it in Sydney.

This upward trend in rental averages demonstrates the strength of Canberra’s rental market, which is influenced by factors such as population growth, infrastructure projects, and government initiatives.

One notable government initiative is the major rental reform implemented by the ACT government on 1 April 2023, which provided tenants with additional rights by eliminating ‘no cause’ evictions from the Residential Tenancy Act 1977.

This reform highlights the government’s commitment to addressing rental market issues and ensuring a fair and balanced market in Canberra. This could ensure the potential for cheap rent in Canberra.

Opportunities and Challenges for Property Investors

Property investors in Canberra can benefit from the city’s affordability and high-performing suburbs, providing ample opportunities for solid investments. So, as an investor, finding cheap houses for sale in Canberra is not out of the question.

However, investors should be cautious of potential risks, such as high strata levies and buying off-the-plan, which could impact the profitability of their investments.

Government initiatives, such as first home buyer incentives and land tax relief, may also present opportunities for savvy investors looking to capitalise on Canberra’s thriving property market.

Canberra’s Housing Affordability

Housing in the ACT is reasonably priced, with the average proportion of income needed to meet mortgage repayments being less than 20%. This affordability offers an attractive entry point for property investors looking to invest in Canberra’s property market.

The government is also taking proactive steps to address housing affordability issues, including increasing housing supply. The long-term outlook for Canberra’s property market remains uncertain, influenced by factors such as population growth, infrastructure projects, and government initiatives.

Investors should closely monitor these factors when making investment decisions in Canberra’s property market.

High-Performing Suburbs

High-performing suburbs in Canberra include

  • Chisholm,
  • Dickson,
  • Franklin,
  • Ngunnawal,
  • Florey,
  • Ainslie,
  • Griffith,
  • Garran,
  • Deakin,
  • Yarralumla,
  • Lyons,
  • Mawson,
  • Pearce,
  • Curtin,
  • Throsby,
  • Richardson,
  • O’Connor,
  • Denman Prospect,
  • Forde,
  • Belconnen Town Centre,
  • and Woden Town Centre.

These areas offer promising investment opportunities, especially for those targeting suburbs where residents’ income is increasing at a higher rate than the national average, such as “established money” areas or gentrifying suburbs.

Check out our review of the best suburbs in Canberra that explores the most popular and liveable neighbourhoods in the city.

While you’re at it, you might also want to review our round up of the suburbs to avoid in Canberra!

Potential Risks for Investors

Canberra Property Market

Property investors in Canberra may be subject to risks such as alterations to government policies or regulations impacting the property market, natural disasters, damage caused by tenants, robbery, vandalism, underwhelming capital growth, lower rental returns than anticipated, a market-wide price decrease, increasing interest rates, inflation, and illiquidity of properties. Being aware of these risks is crucial for investors when making investment decisions.

When investing in luxury units in Canberra, investors ought to be aware of regulations such as strata levies. Additionally, potential risks associated with high strata levies and purchasing off-the-plan should be carefully considered. By understanding these risks and adjusting investment strategies accordingly, investors can better navigate Canberra’s property market and seize emerging opportunities.

Government Initiatives and Their Effects on Canberra’s Market

Government initiatives, such as first home buyer incentives and land tax relief, can have significant effects on Canberra’s property market. These initiatives can stimulate demand for property, creating more opportunities for investors.

Additionally, the impact of population growth on property values and housing demand will continue to shape the market in the coming years.

First Home Buyer Incentives

The First Home Owner Grant (FHOG) is a one-off payment of $7,000 to eligible first home buyers residing in Canberra. Apart from the FHOG, stamp duty concessions are available to eligible first home buyers in Canberra, potentially reducing the stamp duty payable on property purchases. The Home Buyer Concession scheme provides eligible first home buyers in Canberra with a concession on the transfer duty payable on property purchases.

Another initiative is the Regional First Home Buyer Guarantee (RFHBG), which facilitates first-home buyers living regionally to purchase modest homes with minimal deposits. These government initiatives can stimulate demand in the property market, providing new opportunities for investors while also making it more accessible for first-time buyers to enter the market.

Land Tax and Property Investors

Property investors in Canberra are liable for land tax, which is imposed by the ACT government and calculated on a quarterly basis.

However, recent alterations to the law have provided landlords with exemption from land tax if they register their properties. This change can potentially benefit property investors, as it may reduce their overall financial obligations and improve the profitability of their investments.

Infrastructure Projects

Canberra is anticipated to implement several infrastructure projects, including improvements to the transport system, roads, and paths. These infrastructure projects will enhance the city’s overall infrastructure and make it more appealing for prospective buyers.

As a result, these projects may positively impact Canberra’s property market, creating new opportunities for property investors to capitalise on a growing and evolving market.

Long-Term Outlook for Canberra’s Property Market

The long-term outlook for Canberra’s property market remains positive, with the inner north Molonglo Valley and Belconnen areas anticipated to experience the most rapid growth in the period up to 2060.

Factors influencing the market in 2023 and beyond include the impact on home buying capacity, the general economic health, supply and demand, inflation, government incentives, land tax, infrastructure projects, population growth, and housing demand.

Population Growth and Housing Demand

Population growth has been a major factor in sustaining Australia’s property markets, and the Intergenerational Report projects an Australian population of 38,8 million by 2060-61 and 29 million people by 2030.

As the population grows, the demand for housing will increase, which will in turn support property values and drive the market forward.

Future Property Price Trends

Canberra’s 2024 property market shows mixed trends. Some suburbs like Phillip and Hughes are growing due to nearby hospital expansions, attracting investment.

Conversely, the Canberra CBD sees stagnant unit prices, while areas like Kingston remain popular for their location and affordability. Economists predict a 4-5% rise in house values in 2024, indicating a potential market recovery to 2022 levels by 2025.

Additionally, the ACT government’s recent update to its Territory Plan, which allows owners of properties larger than 800 square meters to build a second residence, is seen as a visionary move. This change could increase the number of available homes and influence the property market positively.

Factors Shaping Canberra’s Property Market

Factors shaping Canberra’s property market include supply and demand, interest rates, and consumer confidence. As these factors evolve, they will continue to shape the market, presenting both challenges and opportunities for property investors.

By staying informed and adapting to market trends, investors can successfully navigate Canberra’s property market and seize emerging opportunities.

Summary

In conclusion, Canberra’s property market presents a dynamic landscape for investors, with strong growth, thriving rental markets, and various government initiatives shaping the market. The city’s affordability and high-performing suburbs offer attractive investment opportunities, while potential risks and changing interest rates require careful consideration and adaptability.

As Canberra’s population continues to grow and infrastructure projects develop, the long-term outlook for the property market remains positive, providing ample opportunities for investors to capitalise on Canberra’s thriving property landscape.

Frequently Asked Questions

Canberra Property Market
Property for sale in Canberra ACT

Are house prices dropping in Canberra?

Data reveals Canberra’s housing market is falling. Recent data has shown that Canberra’s house prices have dropped significantly from their peak, pointing to a downward trend in the capital city’s housing market.

This drop could be temporary however.

Are unit prices dropping in Canberra?

Based on available evidence, it appears that unit prices in Canberra are decreasing. Macquarie and Cook have seen the biggest declines at 11.5% and 8.7%, respectively.

Overall, the median value across Canberra units has dropped by 0.5% in the past 12 months.

Will Canberra house prices rise?

Based on current market data, it appears likely that the median house prices in Canberra will rise in the next three years. QBE forecasts indicate that prices could increase by 2,4 per cent over that period.

Therefore, it is likely that Canberra house prices will rise in the short-term.

Are house prices dropping in Canberra?

Overall, it appears that house prices in Canberra are dropping at the moment. Recent data reveals that the median house price for the capital has taken a sharp downturn from its peak, suggesting a decline in prices may be imminent.

However, this could be a temporary dip and prices may rise again in the near future.

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