Is Canberra’s rental market still investor friendly?

Canberra’s residential rental market has long been an appealing proposition for investors, with low vacancy rates and high rental yields offering a combination that almost sold itself.

But the landscape is facing a period of adjustment.

While the national rental market strengthens, the ACT is charting a slightly different course.

According to the latest Domain Rent Report for the March quarter, Canberra house and unit rents increased for a second consecutive quarter, marking persistent growth not seen in almost two years.

And while this is good news for investors, the change is slower than other cities.

Domain chief of research and economics Dr Nicola Powell said Canberra is the only capital to not experience a record high for house rents.

“The Canberra median house rent is $685 per week, only $5 lower than the high last seen in March 2023,” she said. “However, the pace of quarterly growth is a fraction of the previous quarter – roughly four times slower.

“Canberra is the only city to see house rents fall annually, although the rate of decline continues to ease.”

The report shows Canberra’s unit rents are at a record high median of $570 per week, although vacancy rates also remain high.

“In the March quarter, unit rents rose 1.8 per cent – the same as in the previous quarter – providing consistent growth that has accelerated annual gains to their highest since December 2022,” Powell said.

“Canberra’s vacancy rate has fallen to 1.4 per cent from its December record high of 2 per cent but remains the highest of the capital cities. The number of properties for rent is elevated compared to historical levels, providing more favourable conditions for prospective tenants.”

Brett Hayman, Director of Hayman Partners, said the conditions make for a very different investor landscape than Canberra has seen for many years.

“It’s getting more difficult to invest in Canberra,” he said. “Unlike in Sydney and Brisbane where you see tenants lining up for properties, we’re not seeing that as much here. There’s still a demand, just not as high demand as what you see elsewhere.

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“After COVID, we’re seeing more people working in Canberra and living remotely, so that’s taken a little bit of pressure off the Canberra rental market.”

Hayman believes cost of living pressures are also presenting a big challenge for investors, particularly interest rate rises.

A lot of investors are now suffering because not only has the interest rate on their primary place of residence gone up, but also their investment property,” he said. “Plus it’s harder to rent…rents have come back a little bit, and all their holding costs have just gone up.”

Hayman has seen a marked change in investor behaviour, with more requests for appraisals, and many choosing to sell.

“We’re seeing a lot more investors who are now turning towards units where they’re getting a higher yield, but they’re not getting the capital growth. It’s more of a set and forget option,” he said.

“From a property management perspective, both landlords and tenants are more focussed on ensuring they’re getting the most for their money, so it’s become more important than ever to build rapport with both parties to maintain the relationship.”