The federal capital looks to have escaped the worst of the slowdown – and is set for steady growth.
Going by the numbers, Canberra looks to be one of the best-performing markets in the country. According to Residex, house price growth in the July quarter was the best in Australia, with unit growth outstripped only by Sydney’s apartment market.
The federal capital hasn’t been immune to the market slowdown: it’s been more of a gentle slide than a sudden stop, though. That, argues Louis Christopher, managing director of SQM Research, is due to the city’s demographics.
“Historically, Canberra is more influenced by government expenditure. So, for example, if there are significant increases in government spending, the market goes up, whereas if there are cuts, the market goes down,” he comments. “Despite this year’s election, no significant changes in expenditure are signalled, so I’d expect a slowdown in the market in line with the national average.”
However, that could also be influenced by a familiar issue which could get worse in the short-term: a chronic shortage of housing. CB Richard Ellis’ (CBRE) Canberra office director, Marcus Hon, explains.
“The last 12 months have seen really good capital growth, mainly through sheer lack of stock,” says Hon. “There’s not a lot of new land stock coming on either: some greenfield land beyond Gungahlin has been released for development, but that won’t be ready for another 6-9 months, and residents won’t be able to move in for at least another year and a half after that.”
The situation is further complicated by ongoing wrangles over the ACT’s new planning regime.
“The current regime is changing: effectively, the ACT government is bringing in the equivalent of NSW’s Section 94 certificate,” explains Hon. “Not only will that have a knock-on effect on the cost of development, but developers are also wary of beginning projects until that’s settled – further delaying construction and exacerbating the current supply issue.”
One section of the property market which Hon recommends investigating is the smaller unit market. “There’s a lot of demand for one-bedroom and two-bedroom units, and they’re selling very well,” he comments.
“That’s only going to get tighter, due to sheer lack of stock for a year or two.”
He recommends the inner north and inner south as good areas to focus attention on, but concedes that buyers may need to move towards the Belconnen area if affordability is an issue. He also cautions that, despite the supply pressures, buyers should not expect to get stellar returns.
“The all-round softer market conditions are likely to mean prices remain buoyant rather than rocket up: I’d expect average growth of around 5% over the next year,” concludes Hon.