The general theme for property markets around Australia is recovery, with many cities and regional markets mounting significant revivals in their markets as the year has evolved.
But there’s one major market that I would avoid as an investor – Canberra.
This is a market that looks increasingly unattractive, for a host of reasons, including political interference.
The first reason is that Canberra is not showing any signs of joining the revival momentum seen in most other parts of Australia.
While Melbourne, Sydney, Brisbane and many state regional markets are seeing their sales activity and prices rising, Canberra is not experiencing any of that uplift.
Its market seems to be stuck in neutral, with sales activity decidedly lukewarm and prices showing no signs of uplift.
The second reason is that Canberra offers little in the way of affordability. It’s median house price, around $960,000 in August 2023, is the second highest in the nation after Sydney.
Most cities have a range of market segments, from the affordable to the middle markets to the top end, but pretty much everywhere is expensive in Canberra. Its cheapest suburb has a median house price above $700,000.
The third reason is that its rental market is not performing. At a time when most locations have vacancy rates at 1% or lower, Canberra is the only capital city with a vacancy rate above 2% and the only major city where rents are not rising.
Indeed, according to SQM Research, Canberra rents are falling.
The fourth and perhaps biggest reason to avoid Canberra is that it has a government which appears determined to discourage anyone from investing there.
The Greens are a coalition partner with Labor in the ACT Government and they are determined to decimate the rental market with a rent freeze.
The ACT Attorney-General is also the ACT Greens leader, Shane Rattenbury, and he seems determined to force a rental freeze on the Territory Government and the Canberra market.
ACT Greens backbencher Johnathan Davis in July released a draft bill proposing a two-year ban on raising rents, followed by an annual cap of 2 per cent increases.
This would be a disaster for the property market in Canberra – it would force many investor owners to sell and the Canberra vacancy rate would end up close to zero.
A rental freeze is no use to a prospective tenant who can’t find anywhere to rent at any price.
The proposition that an owner of a property, faced with massive increases in their costs including interest rates, council rates and insurance premiums, is prevented from increasing their price – is both ridiculous and untenable. Many will have no choice but to sell, robbing the Canberra market of thousands of rental properties.
Rather than address the fundamental issue which is the long-term shortage of rental properties, the Greens want to apply a bandaid which will do little to stem the haemorrhage.
Chief Minister Andrew Barr has ruled out the measure, mirroring tensions between Labor and the Greens at the federal level.
But the naivete of the Greens in these matters is quite extraordinary.
And they’re adding to a growing list of reasons why nobody in their right mind would want to invest in real estate in the national capital.