ACT Investment in Canberra or elsewhere?

Investment in Canberra or elsewhere?

I am interested in buying an investment property in Canberra. Given that this will be my first investment property, will definitely need some valuable advice from the experts here.
1) I am not going to get an apartment but what is everyone's thoughts about townhouses? Is it as as bad as getting an apartment?
2) I saw some new development (townhouses) in Denman Prospect, Watson, Bruce, Dickson just wondering if anyone has any thoughts about them, which one would be recommended based on your experience, given there are quite a few builders there.
I wouldn't want to end up getting one and then ended up with poor quality building and paying high body corp.
3) I have a budget of AUD650k and looking for new development (townhouses), given that they are new, they have higher depreciation which i could claim compared to older buildings.
4) Is there any suburbs which you would recommend for good capital growth but not too bad of a rental yield. Of course, having both will be great but I guess its usually one or the other.
5) I wouldnt mind investing elsewhere but not having good contacts and recommendation, makes it a bit difficult to do so.

Thanks in advance and apologies for posting so many questions. As a first time investor, always curious and overwhelmed! Look forward to reading all the responses and hopefully it will help others like me too.

 

Just be very careful buying into a new development and expecting good capital growth in the short to medium term. 9 out of 10 times when you buy into a new development the developer has already extracted most of the value out for some years to come.

 

Hi Melissa. I live and invest in the Canberra market, but also invest around the country.
1- I think townhouses sit somewhere in the middle of houses and apartments and growth generally reflects that. Not as bad as an apartment but not as good as houses in Canberra.
2 . Personally I would never buy brand new or off the plan in Canberra for apartments/townhouses. So many dodgy builders, most new blocks have defects, plus they are overpriced compared to those 1-2 years old or older. Yes depreciation is better, but that’s the only benefit. You don’t know strata fees, don’t know how the complex will turn out plus the defects are unknown.
3. With 650k you can definitely get a house and you will see much better capital growth in Canberra with a house. Look at Higgins and holt in Belconnen and surrounding suburbs, you will buy older but can add value with Reno.if you want a newer property, have a look at Harrison and Franklin in Gungahlin. Schools, shops, light rail and Gungahlin town centre close by, you might get a small house for 650k or a quality townhouse that is well established.
Also look at the suburbs in Weston creek, but avoid Tuggeranong.
The main demand in canberra comes from families who come to live here usually with govt jobs and then stay as it’s a great lifestyle, which is why apartments struggle with capital growth (although yields are high)so if you buy a townhouse look for a large one near schools with space for a family. Franklin and Harrison have some decent ones.
Also ask agent how much rates and land tax are on each property and do your sums, as expenses very high to hold investment properties in Canberra, although rents are also high. So figures can add up but make sure you know what they are.

 

I'd look into bigger blocks with older established homes in established areas with higher proportion of OO's such as Evatt in the north or Kambah in the south.
Cheers

 

Hi Melissa

Good idea to stay away from apartments. I bought a PPOR in Canberra 7 years ago. I was 22 and had some money and didn’t know a thing about property. Being young and wanting something cool I was looking at one of those shiny new apartment towers in Belconnen. A dads mate convinced me to look elsewhere, and I’ll be forever grateful.

I ended up buying a off the plan triplex in Crace (effectively townhouse size without BC fees). I had no issue with the build but you hear of other stories of new builds that have defects throughout.

I moved 4 years ago for work and have rented it out ever since. 3 out of the 4 tenants have been public servants, only staying for their 12 month lease. But every time it’s been re-rented i have got an extra $15-25 per week and it’s never been vacant more than a few days between the change of tenants.

The capital growth has been ok. I recently had it valued mid 500s and bought it for 425. With hindsight, I wish I bought an older place around Florey, Holt etc. and did some renovations because I don’t mind doing handy work around the house. I maybe could have done better that way, but I certainly could have done worse with an apartment.

People will say there is more money to be made in other states but I have found Canberra to be a steady burner and I’m happy with where I’m at. Starting to really build some equity which I’ll be using to fund the next property purchase.

Posting on here and getting opinions/other people’s stories is a great first step and one I wish I did. But when the time comes, if you think you’ve found a place and the numbers look good. Bite the bullet and enjoy the ride!

Good luck.

 

Hindsight makes it so hard. I bought one of those older houses in Florey and have done some minor reno's.... but wish i stretched myself a little more at the time to buy in Kaleen like I originally wanted to!

 

Thanks! Good advice. I was definitely attracted to the new ones to be built in Denman Prospect, Bruce or Dickson, simply because I thought, it will be less maintenance given they are newly built house and better depreciation. I have heard of dodgy ones but didnt know it happens that frequently in Canberra. What are your thoughts on off the plan houses then? Do you have any recommendation of good and reputable ones builders in Canberra? Thanks

 

My short answer is I personally would never buy anything OTP. The risks faaaar outweigh the benefits.

If your after a good deal which still has value in it, I would be avoiding anything new and shiny. Most if not all the value is already gone for years to come.

I know pretty much nothing about Canberra but if I had to make a guess I would be buying an established house, in a decent OO area, which needs a cosmetic renovation and or has the potential for future complete renovation. " Worst house on best street" sorta thing. But you also need to do what resonates with your financial situation and investment goals.

But at the end of the day, I would be staying away from off the plan and anything new from a developer.

 

Thanks Todd. These are really great advice, appreciate it. Some questions on a few points that you raised:
3. I am guessing those suburbs you mentioned are the popular suburbs based on my affordability . I was thinking of Kaleen, Giralang, Florey, Page, Lawson. As for Gungahlin, I have been told Amaroo and Bonner are quite popular too. I went to Weston Creek too, my friend's parents bought in Rivett recently for almost 700k, unfortunately, its just out of my price range.
- Do you see them as good areas to invest in?
- Why avoid Tuggeranong?
- When you mention small house, what estimated block size are you referring to?
- Can you please recommend any property manager, broker, accountant, builder for renovation in Canberra. I guess getting the right team is the first thing for me to get started as well.

Appreciate it that you are taking time to reply all these questions. I am already learning a lot by starting this post...

 

Thanks James. I saw one in Florey recently, it looks quite nicely renovated inside 3B + 1 Bath, within my budget. Florey seems like a good place, given that it is so near Belconnen Town Centre, do you see it difficult to get tenants around the area? Kaleen is in my wishlist but I have been told by one agent that it may have reached its peak and probably with what I have, it is impossible to get a house there, perhaps Giralang might be a better option now.

$589,000
Block size:
483 m² approx.
UV: $316,000 (2019)
Land Rates: $2347
Land Tax : Unknown

 

Thanks Nicho for the feedback and sharing your investment thoughts in Canberra. I have to say I was definitely tempted by all the new shiny buildings being built here. I think after reading all these post, I think its pretty clear what I should stay away from.

- Crace seems to be a popular area too. I think wt my price range, I can only probably get townhouses there. If you dont mind sharing, how much are you renting out for and did you have to do a lot of maintenaince/repair on the house?
- Would appreciate it if you could share some contacts, broker, builder for reno, accountant,property manager.

Appreciate it! Cheers

 

Kaleen, Giralang, Florey and Page I like, I do think they are good areas to invest in. Lawson is all new properties and very expensive, wouldn't buy a townhouse there either because they are a dime/dozen and more being built. Yes I mentioned Holt/Higgins because they are in your price range and you will get more land than in the suburbs above.
Tuggeranong - just too far from everything for me, harder to get tenants, I feel it's the area people go to when they can't afford anywhere else.
Small house - I am saying block size 350-400 in those suburbs for 650k or less
Property manager - I use Century 21 Canberra City and have been very happy with them
Accountant - Pamela Hussey and Hussey and Hussey is really good, has done my tax for years and I have multiple properties
Broker - Get in touch with Jamie Moore who is a member on this website and often comments on Canberra threads. have a look at some of his posts.There are many other brokers on here that will help you
Builder - can't help sorry. However if you do a search "canberra" on here you will see other Canberra threads with more info on builders.
I like Amaroo, it's a bit more affordable than Franklin/Harrison. However Franklin/Harrison are the closest Gungahlin suburbs to the city, have the light rail, good schools, close to Gungahlin shops, Franklin shops and easy access to Hume Hwy and to Horse Park Drive around to Fyshwick, so I like them better long term

 

I'd look at Wanniassa - it is only just over the ridge from Woden and there are nice properties with great outlooks (if there was no smoke). Maybe not in budget for the views thought

 

Maybe you need to work backwards. What is the end goal you want out of property? Do you have a time frame or cash goal.

I use Home • Home by Holly for my townhouse rental.

 

I would definitely avoid units in Canberra, there has been a massive oversupply for years and more seem to be going up all the time.

There are periods of price stagnation, however prices seem to have been on the up for the last few years.

I have a house in West Belconnen and have seen it go up about 25% in the last 2-3 years. I think there is still some growth to come. Mind you, there was very little growth in the 7 years prior to that, while other markets boomed.

Would I personally buy in Canberra now? No. Holding costs are excessive compared to other cities where growth may be equal or greater. Definitely check how much rates and land tax is for each property (you pay land tax on every rental property in the ACT, allhomes has the amount payable within the listing).

Positives of investing in Canberra - it is easy. There is a regular supply of good quality tenants with high paying jobs. A good house will rarely ever be empty.

As for avoiding Tuggeranong, I think that is someone's personal preference as opposed to it being a good or bad investment. Plenty of people do well out of properties in Tuggeranong. There are of course good and bad areas everywhere.

I use Peter Blackshaw Gunghalin as my PM and they have been great.

 

I’m currently getting $530/week for a 3/2/1.

It was built by APA Homes and I had no problems with the build. I have had a couple of maintenance issues but nothing too expensive.

Jeff Cox at Cox Sherlock is a great accountant. My property is managed by McGrath Gungahlin and I’ve had no issues with them.

I used ProMortgage for my mortgage broker needs but the guy I was recommended has retired and his replacement has left. I’ve started dealing with the banks directly.

 

Land to asset ratio a little low for me.... personally my preference would be to look for a larger land component.
Vacancy is low in ACT for a number of reasons if your comparison is between states.
I self manage and only had 3 days between tenancies.
3br1bath is renting for 580 ( i just used gumtree to advertise, asked for 1 month rent and bond up front and 100pt of ID).
I'd use the heatmap on microburbs or similar site to look at where the housing commission streets are and also spend a bit of time in the area looking at the streetscapes etc to find which are the good streets.
Hope that helps

 

Thanks for the suggestion. I never thought of Wanniassa. In fact, the only place I thought of is Kambah but again thats only my personal opinion too as I live in Belco area, going to Tuggeranong is not something I do often as it is a bit far for me as I could get most things here. I will try expand the search with your suggestion. Cheers

 

Thanks for the advice.
- Mind if I ask, which suburb in West Belconnen?
- I also do think it is expensive holding on to it in ACT but I dont have any contacts elsewhere that I can rely given that this is my first investment.
- As for the tax and rates, how much do you think is reasonable?

 

- I thought of self managing it but I have been advised not to given that this is first property and to avoid all the hassle. Do you have a checklist for self management of the property especially in case something happens.
- The checking of housing commission streets is definitely a great suggestion. Thanks for that!