Investment Property Prospects in Australia’s Capital Canberra

According to the Australian Capital Territory’s Real Estate Institute, significant property investment interest has left Canberra because of excessively high rates of land tax on residential property, and unless the ACT government abolishes this tax Canberra could be about to face a property crises.

A serious lack of real estate investment has resulted in low levels of rental properties being made available and a distinct lack of lower cost housing being constructed for first time buyers.  In addition to this, Canberra has received welcome news that it is to receive a significant jobs boost in 2007, and all of these factors are conspiring together currently and the investment property prospects in Australia’s capital Canberra are going to be incredibly interesting to observe throughout 2007 as a result.

Depending on who you speak to you will receive a very different view of the property market’s prospects in Canberra. 

The ACT Real Estate Institute who are lobbying the government for the abolition of land tax believe that such a step would kick start serious international property investment activity in the greater Canberra region because there is undeniable demand for both rental accommodation as well as new housing stock, offering investors the potential to reap substantial rewards. 

However, without the abolition of land tax it can represent up to 70% of income from property and that is just such a restrictive amount that it is not currently of interest to be in Canberra’s property market as an investor.

So confident is the Institute that the abolition of land tax is the way to go, they are predicting that the housing crisis that is actually looming in Canberra could be overcome by the end of the year and Canberra could become the next property investment hotspot in Australia if land tax is eradicated.

In the meantime Chief Minister Jon Stanhope believes the way to alleviate the stress on the housing market is actually to release more land for residential development. 

Speaking in reference to the reports that Canberra is facing a significant increase in job numbers in the public services sector, Mr. Stanhope admitted that the recruiting of thousands of new workers from across Australia to work in Canberra would of course put substantial strain on an already creaking real estate marketplace - although it would of course be a welcome economic boost to the city.  Mr. Stanhope decreed that Canberra’s tight housing policy was still the way to proceed and that the slow release of more land as well as investigations into why certain postponed but green-lighted developments had yet to get underway should take the pressure off the property market sufficiently.

Consumers are less sure that Mr. Stanhope’s positive outlook will result in an easing of pressure in Canberra’s housing market.  In Gungahlin’s subdivision of Forde, thirty seven parcels of residential land were released to the market over the Australia Day long weekend at the end of January and there were queues of buyers resulting in the parcels selling out within one short day.  Forde is a joint venture between the government’s Land Development Agency, developers Delphin Lend Lease and the Canberra Investment Corporation – because of the speed at which parcels were sold and the ensuing rage among desperate buyers left empty handed despite queuing round the clock to get a parcel of land, a further eight parcels were made available and snapped up for prices in excess of AUD 200,000.

There’s no question about it – there is just not enough property stock available and what is available is massively over subscribed.  Rental rates have been soaring unabated and even the opening of the Uni Lodge to house students from the Australian National University is unlikely to free up required rental property.  Demand in the market is largely for quality, middle of the range property stock and there is just not the supply available.

It’s clear that there is significant potential for property investment returns to be healthy in Canberra – but at the moment affordability remains an issue for investors contemplating the market because taxation erodes potential gains severely.  If the ACT Real Estate Institute is successful in lobbying the government for the abolition of land tax there will be a land and real estate grab in Canberra like no other seen in recent times in Australia!  But how likely is it their lobbying will be successful?  Not very…

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