Within the last year, Canberra has gone from the third most expensive Australian city for rentals, to the top of the list. Overtaking Melbourne and Sydney within just a 12-month time frame, it’s clear something going on. In what’s been described by the Canberra Times as the “perfect storm”, the combination of record-low interest rates, Australia’s fastest-growing population and our countries highest average incomes are key contributing factors.
Our nation’s capital is undeniably one of Australia’s hottest property markets, and it’s showing no signs of slowing down. Coming off the back of six consecutive years of house price growth, Canberra currently has a rental vacancy rate of just 0.6%. With upwards of 69% of the population of Canberra currently renting, it’s no surprise rental prices have skyrocketed in the last year. Along with the population growth, low-interest rates and high incomes, Canberra rental prices are also influenced by an increase in holding costing through new land taxes and rates.
The ACT population now sits at over 450,000, with a growth rate exceeding 2.2 per cent per year. The population growth in Canberra isn’t just secular as well, it’s also quite cyclical which also contributes to the soaring price of rental properties. Each year sees a new wave of university students, government workers, national department employees all flock to Canberra, most of which are searching for rental housing either long term or until they get settled. This, along with the slew of other factors already mentioned leads to the majority of rental properties being empty for only a week or less between tenancies — supply is low and demand leaves tenants with very little leverage to negotiate.
While the city centre and surrounding suburbs are undergoing a significant apartment boom at the moment, many of them set initial rental prices based on the current market, meaning rent in a brand new Canberra apartment is more expensive than ever, so although the supply issue is on the mend, the pricing issues remain.
It’s also worth noting how difficult measuring affordability can actually. With the highest average incomes in Australia flowing into the pockets of Canberrians, are rental prices really out of reach for locals? While high wages have masked affordability issues in the past, even when the high median household incomes in Canberra of $108,000 per household, many suburbs in Canberra are still affordable. Indicated by rental costs that make up over 30% of your income. While the average house rental ($560 per week) and apartment rental ($465 per week) both fall within this affordability range for those earning over $97,000 annually, for those who fall below that, housing stress is a reality of living in Canberra.
Although rentals are undeniably expensive, property purchase prices in Canberra are comparable to Queensland, with a median house price of $672,000 and median apartment price of $440,000. It’s good news all around for property owners in Canberra, with the latest figures also indicating a rental return of 6.02%, also the highest in the country.