Canberra apartments in hot demand
May 23, 2012
Strong fundamentals are fuelling demand for new apartments in Australia’s capital, according to new research by Colliers International.
According to the latest Canberra Apartment Research & Forecast Report, demand for apartments in Canberra is set to remain strong in the medium term.
Paul Powderly, Colliers International State Chief Executive, ACT, said demand was likely to be assisted by the Reserve Bank of Australia’s recent decision to cut the cash rate by 50 basis points, coupled with the region having the second lowest vacancy rate and highest average weekly earnings in the nation.
“These positive fundamentals will ensure Canberra is suitably positioned for both investors and owner-occupiers in the foreseeable future,” he said.
“Though supply levels have risen over the year due to new projects being released, we do not expect to see a glut in the Canberra apartment market in the long term.”
This was predominantly due to barriers to entry that developers must overcome to bring a development to fruition, including the time associated with obtaining development approvals plus the high pre-sale commitments required by financial institutions prior to gaining construction finance.
Mr Powderly said positive underlying fundamentals would assist with the absorption of product across all precincts and projects.
“The sales rate in the Inner North and Inner South precincts will be driven due to the areas’ proximity to employment and lifestyle opportunities,” he said.
“Whereas buyers will be drawn to the outer precincts of Belconnen, Gungahlin, Woden Valley, and Tuggeranong due to the affordability offered.”
Between 2012 and 2015 there were potentially 7,037 apartments which may be released within the Inner North, Inner South, Belconnen, Gungahlin, Woden Valley, and Tuggeranong precincts in Canberra.
The highest number of potential new apartments were in the Inner North (2,052) followed by Belconnen (1,802).
Margaret Bowden, Colliers International Research Analyst, said affordable stock priced below $600,000 was anticipated to comprise the majority of the market in the medium term, making the Canberra region highly accessible for both investors and owner occupiers looking to purchase an apartment.
Apartment transactions across the Inner North and Inner South Precincts over the third quarter of 2011 remained weighted towards affordable stock, with 68 per cent of sales within the $300,000 to $500,000 range.
This price range comprised at least 50 per cent of overall sales in these precincts over the last two years and was likely to continue to do so as stock in area remained affordable.
Ms Bowden said median prices remained stable over the first quarter 2012 in all areas but the Inner South and Gungahlin precincts.
“Eight projects are expected to complete in the Inner Precincts of Canberra over the 2012 calendar year, while seven are expected to be completed in the outer precincts,” Ms Bowden said.
“Of 6,180 apartments available for sale throughout the Canberra region, more than 3,500 have already sold.”
Over the past six months, the percentage of overall sales had decreased in the Inner North and Inner South precincts by 2 percentage points to 76 per cent.
“This is despite a further 422 apartments having been identified in the market within these two precincts, equating to a 14 per cent increase in supply,” Ms Bowden said.
“Overall, the sales rate has remained strong over the past six months, signifying demand for medium density product within the Canberra region.”
Over the past 12 months, the Inner North and Inner South precincts of Canberra had seen five projects comprising 270 apartments sell 100 per cent of their stock.
Over this same period, eight projects had been completed and approximately 14 new projects had entered the market.
“Eight developments are scheduled to be completed over the 2012 calendar year, with these developments comprising 28 per cent of the total number of apartments currently being marketed in these precincts,” Ms Bowden said.
According to the Real Estate Institute of Australia, the rental market in Canberra was still very competitive, with the vacancy rate increasing over the year to December 2011 by only 0.2 per cent, to 1.9 per cent.
“This figure is still well below the industry benchmark of 3 per cent, at which demand and supply of rental product is deemed equal,” Ms Bowden said.
“It is also notable that this is the second lowest vacancy rate of all the capital cities, behind Sydney.”
Median weekly rents for a two-bedroom medium density dwelling had increased by 5 per cent over the 12 months to December to $440.
“This is the highest rental value recorded to date for this type of dwelling in the Canberra region,” Ms Bowden said.
“Canberra also has the second highest rental figure for this type of dwelling of all the capital cities, behind Sydney, for the December 2011 quarter.”
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