October 2014 – Canberra High Density Residential

20 October, 2014 / Vanessa Rader and Andrew Smith

Foreign investor activity has entered the Canberra residential development site arena boosting total sales volumes four times over the long term average.

During 2013/2014 foreign investment most notably from Asia has accounted for 35.4% of turnover which represents over 690 dwelling units and setting new benchmarks in value. While other capital cities have shown strong growth in new apartment prices, recent high supply has ensured median apartment price remain stable keeping domestic developers cautious opening the door to these more bullish investors.

Like most major cities across Australia, the last 18 months has been a strong year for the purchase of residential multi-unit development sites across Canberra. Turnover activity peaked in the first half of 2014 which resulted in 22 site sales which totalled $154 million. The next highest level of activity was the second half of 2013 which was less than half this amount of $64 million. The most notable trend which has emerged over this period has been the increased activity by foreign investors which contributed to 35.4% of all sales during this most active 2013/2014 financial year. Gungahlin historically has had the most stable level of investment activity averaging around $15 million per annum. Over the past two years however the emergence of site sales in the Belconnen and Molonglo precincts has grown these investment levels each year while sites across more established precincts of Inner North, Tuggeranong and Woden have boosted up these turnover levels more recently.

Single entities buying multiple sites has caused historically active developers to miss out and become more aggressive in their future purchase.

While supply and demand fundamentals have remained reasonably balanced across Canberra, the release and sale ofland by the Lands Development Agency
over the past 18 months will increase development and residential supply for the city. The $218 million which changed hands over the 2013/2014 financial year has translated to an anticipated addition of 3,400 units which is in excess of the anticipated dwelling units required to meet the forecast annual housing demand. The two largest buyers of Canberra developments sites during this time have secured land with an ability to develop approximately 1,300 units. It is expected these developers will stage the release of units match market demand.

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