ACT falls off investment hotspot list

Canberra city was on the previous list due to its “consistency as a market in a time when growth was uncertain”, Smart Property Investment editor Phillip Tarrant said, but got bumped this year for Tasmania's Franklin.

Across the border, NSW tallied 11 investment hotspots though none were near the ACT border. The picks, which included outer Sydney areas such as Blacktown and Penrith, were based on affordability as well as capital growth indicators such as migration, wage growth and gentrification, Mr Tarrant said.

“Investors can still enter these markets in the $200,000 to $250,000 bracket and generate rental yields that can cover the majority or entire cost of mortgage repayments plus other investment holding costs,” he said.

“Canberra's high entry level price can deter investors, especially when they are seeking more affordable investments in the sub $300,000 mark.”

The slowing growth of home values over the past decade could also be discouraging investors from buying in Canberra, according to researchers.

RP Data senior research analyst Cameron Kusher said the rate of growth had tempered from 15.3 per cent growth at the end of 2002 to just 2.3 per cent over the past five years.

“For investors, they're not getting the capital growth they've seen in the past,” he said.

“They need to focus more on rental returns.”

The average annual growth in home values in Canberra between December 1997 and December 2002 was 15.3 per cent, the strongest of all the capital cities, according to RP Data figures.

The rate then slowed to 9.4 per cent over the following five years to December 2007, before slowing to 2.3 per cent between December 2007 and December 2012.

“I think the next five years is probably going to resemble the past five,” Mr Kusher said.

“The issue is where prices are, they're limited as to how much further they can slow when you look at land prices in Canberra.”