Canberra is the Capital City of Australia with a population of approximatley 348,000, making it Australia's largest inland city. Canberra is an entirely purpose built city. The city's design was heavily influenced by the garden city movement and incorporates significant areas of natural vegetation that have earned the citys title of "Bush Capital". Hidden beneath the leafy surrounds is a thriving modern city with stylish restaurants, hip bars,boutique shopping, fun for the kids and a busy calandar of events and festivals.
As the seat to Government of Australia Canberra is the site of Parliment House, The High Court of Australia and numerous government departments and agencies. It is also the location of many social and cultural institutions of national significance such as, the Australian War Memorial, National Gallery of Australia, National Museum of Australia and the National Library of Australia.
Market Analysis
COMPILED: September 2009
Canberra is a city of moderate population growth, with a recent (2003 - 2008) annual growth rate of approximately 1.2%. When compared with national growth statistics, the Territory ranks fourth of the eight states and territories, and falls just short of the national average of 1.3%. Population growth in the ACT is forecast to decline in line with the national average over the next ten to twenty years, reducing to an estimated 1.0% per annum by 2026. Despite the moderate population growth characteristics of the ACT, the local property market has some striking characteristics which serve to support long term increases in house prices.
Internal population movements within Canberra tell an interesting story. The areas to the south of Canberra (Tuggeranong and Woden districts) and some areas of the north west (Belconnen district) have been experiencing a slow population decline over the past five years. This has been primarily due to the aging population in these areas, combined with aging infrastructure and housing stock. In contrast, central Canberra and the northern district of Gungahlin have experienced a large population influx over the corresponding period. The contrasting trends are forecast to continue for the foreseeable future.
The Canberra economy is dominated by the public sector, with the Federal and ACT Public Services constituting approximately 43% of the total workforce. The economy as a whole has proven itself to be very strong over the medium to long term, with the key economic growth measure, the Gross State Product (GSP), consistently outperforming the national average. Additionally, the GSP per capita - a measure of individual productivity - is consistently the highest in the nation, at 31% above the national average. Of note is the very large contribution of the national Defence budget to the local economy - approximately 15% of the annual Defence budget ($3.7 Billion) is spent directly within the Canberra economy.
Private industry in the ACT is dominated by three main sectors; Tourism & Conventions, Retail and Construction. Of note is the fact that the local retail industry services not only the local population, but also services an additional 200,000 people from the wider Canberra region.
In addition to these sectors, the local private sector economy is supported by a diversified industrial base, including areas such as:
- Information & Communication Technology;
- Biotechnology;
- Education; and
- Environmental industries.
For a moderately sized city Canberra is experiencing an extraordinary amount of infrastructure development. Presently there is over $3 Billion in major infrastructure projects being developed throughout Canberra, including major projects such as:
- $200m - terminal upgrade at Canberra Airport;$600m - construction of the ANU Exchange;
- $600m - new Department of Defence office buildings;
- $460m - headquarters of ASIO and the Office of National Assessments;
- $350m - development of York Park for housing the Commonwealth Department of Environment and Water Resources;
- $250m - office buildings at Constitution Avenue;
- $300m - combined municipal projects (roads, schools etc);
- $300m - development of Section 63 (commercial site in the city centre); and
- $100m - development of the Hume industrial complex
Canberra's underlying supply/demand balance is currently very tight, with the market currently undersupplied by an estimated 2000 dwellings. Additional housing demand is estimated at approximately 2500 dwellings per year between now and 2014. When compared with forecast construction rates of 2000 dwellings per year over the same period, a significant imbalance is revealed, further adding to the supply / demand pressures within the Canberra market.
The ACT government has recently taken steps to address the looming undersupply situation by committing to releasing more land over the upcoming five years - up to 3000 sites per year. This is likely to address the dramatic undersupply situation; however it may have a moderating effect on increases to the median house price in development areas controlled by public entities such as the ACT Land Development Agency. This factor has been recognised by the government; the ACT Chief Minister has committed to close monitoring of the land release program in order to avoid an over-supply situation. Additionally, there are development sites that have been handed over to private development consortiums that are in a position to control the release of home sites outside of the government's release program.
Key drivers of the Canberra housing market are its extremely low unemployment rate and the very high disposable income of the general population. The ACT consistently has the lowest unemployment rate of any state or territory in Australia, currently sitting at approximately 3.6% (Aust. Average 5.9%). This low unemployment rate, when combined with the highest median income of any state or territory in the nation, leads to a situation in which the housing market in general is well supported by high levels of disposable income. (In fact, the average Canberran's disposable income is 61% higher than the national average.)
The rental market in Canberra is consistently one of the strongest in the country. Local rental yields are second only to Darwin at approximately 5%, and Canberra has a vacancy rate that is consistently one of the lowest in the nation, with the current vacancy rate sitting at 1.4%.
A notable risk to short term capital growth in Canberra market is the government's land release program. Investors should pay close attention to the detail of the land release program in order to assess its effect on supply in any given area. In particular, suburbs already dominated by investors, first home owners and social housing projects should be avoided. Newer areas with a higher socio-economic status, particularly those with development control by private developers are assessed as being likely to avoid oversupply situations in the short to medium term.
Long term capital growth in the Canberra market is likely to be supported by:
- Moderate yet consistent population growth;
- A strong, diversified industrial base;
- Very high Public Sector presence (with consistent salary increases); and
- Very high levels of employment and disposable income.
For more information regarding opportunities in the Canberra region please contact:
Michael Andrae
NPA-Canberra
0412265842
michael.andrae@newprojectsaustralia.com.au
Statistical sources:
ABS 3218.0 - Regional Population Growth, Australia, 2007-08
ABS 3222.0 - Population Projections, Australia, 2004 to 2101
ACT Chief Minister's Department
ACT Department of Treasury
Market Data Sources:
Matusik Property Insights report "Australia on the Move"
BIS Shrapnel Report "Building in Australia 2009-2024"
National Housing Supply Council "State of Supply Report"
ACT Chief Minister's Department
API magazine "Supply and Demand" Aug 09
