A six-year low in unemployment is providing a welcome boost to Canberra’s residential market, driving demand for housing stock.
According to CBRE’s MarketView report, the more positive employment outlook is being underpinned by improving conditions in the public sector.
CBRE Senior Research Analyst Jacob Fong said house prices in Canberra had been trending up over the past year.
“Strengthening buyer demand is being underpinned by the more positive employment outlook,” Mr Fong said.
“After a three year wage freeze in the Australian public sector, wage increases for some departments have been recorded and there are expectations for more widespread increases as contracts are renegotiated.”
The report shows Canberra house prices lifted 1.2% in the second quarter of 2016 – reflecting a 6.2% increase year on year and bringing the median house price to $588,000.
The rental market also recorded a strong quarter, with median weekly rents increasing 2.0% to $510 in the year to June 2016. Yields tightened 19 basis points from 4.73% to 4.54% in the same timeframe.
Over the past year, Canberra’s labour market has improved significantly, with an increase of 5,100 jobs – reflecting a 2.4% jump on the past 12 months.
“The current unemployment rate of 3.0% is at its lowest level since 2010 and as helped underpin an improvement in rental demand, as shown by lower vacancy levels,” Mr Fong said.
Canberra’s apartment market recorded a slight improvement over the quarter, with prices increasing 0.4% to a median of $407,000.
Median apartment rents lifted 2.5% to $415 per week in the year to June 2016, while rental yields softened from 5.20% to 5.30% during the same period.
Andrew Stewart, CBRE Managing Director, ACT, said continued demand for apartment style living continued to support low vacancy rates in Canberra.
“With yields averaging 5.29%, and a low cost of entry into the sector with the median apartment price of $401,500, Canberra remains a compelling destination for investors,” Mr Stewart said.
Evidencing the trend, houses sales jumped 12.4% to 5,031 over the past year, while apartment sales recorded an increase of 20.9% to 3,842 during the period.
“Owner occupiers in Canberra have also been taking advantage of the low interest rate environment, with refinancing of loans showing a 33.2% spike over the past 12 months,” Mr Fong added.
Residential land estates continue to attract demand, however the strong prices seen over the past year has eased, while demand for prestige housing stock has also increased.