Canberra house prices crossed the $1 million median for the first time in FY22, with dwelling values across the city almost 40% higher than pre-pandemic levels by the end of the year.

Three years of consistent growth has led to Canberra decoupling from the smaller capital cities to join Sydney and Melbourne as Australia’s most valuable property markets.

As discussed in our McGrath Report 2023, this makes the nation’s capital exceptionally well-placed to weather the economic challenges ahead. Its median house price is currently $990,851, according to CoreLogic.

With significant new wealth amongst homeowners, and locals earning Australia’s highest average incomes, Canberrans are well equipped financially to cope with rising inflation and interest rates.

Unlike Sydney and Melbourne, median apartment values in Canberra also soared in FY22, up 18.3% to $629,531. This was largely a result of record demand from first home buyers and investors, amid a growing undersupply. The median apartment price is currently $608,653.

The apartment market has benefitted from an undersupply which might seem surprising given the large amount of medium-density residential development occurring in the nation’s capital.

The city is adopting apartment living at scale for the first time, as its population growth becomes too great and land supply too limited to allow continuing urban sprawl. 

But much of this new stock is designed for downsizers. The challenge for first home buyers is to navigate the fierce competition for a low supply of smaller one and two bedroom apartments.

Many Canberra homeowners are choosing to reinvest their new equity in local property. ABS data shows there has never been more money borrowed per annum to buy or renovate investment properties in Canberra than in 2021.

Scores of parents are motivated to buy investment apartments to give their children a home whilst studying at university amid the rental shortage. 

With the city’s vacancy rate at 1.1%, landlords are earning the highest median weekly rents ($690) of all the capital cities and rents are still growing. Returning international students are adding more competition to the market.

Although Canberra home values have risen exponentially, there is still much opportunity for future growth, which is another factor fuelling buyer sentiment.

Key retail and job districts such as Gungahlin and Belconnen are buzzing with major infrastructure projects all designed to enhance liveability.

A key example is the masterplanned redevelopment of Belconnen Town Centre, which is causing a ripple effect through surrounding suburbs. Young families wanting to live close to impressive new amenities are purchasing older houses to renovate or rebuild.

Their budgets stretch further in the north, with older houses starting at about $1 million. Suburbs in the north don’t carry the sometimes hefty price tags of the city’s older southern suburbs, but that is why there is more upside for home values.

Canberra has an excellent economy, it’s easy to get around, and Sydney and Melbourne are more accessible via the upgraded M31. Its proximity to the south coast and snowfields makes it ideal for those people valuing more holiday-at-home options in the COVID-19 era.

With supply of homes for sale increasingly limited, Canberra is likely to consolidate its price gains in FY23, with fewer transactions expected as people stay put and watch how the economy copes with the first rising interest rate cycle in more than a decade.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

For more information including articles, checklists, guides and more visit McGrath’s Insights Centre.

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