Uncertainty hovers over market
Buyer activity is warming up, even as the prospect of federal cutbacks looms over the market
After a recent period of stalled buyer activity, Canberra’s housing market is showing signs of reinvigoration, according to Australian Property Monitors’ (APM’s) latest Capital City Market report.
Median house prices rose by 1.3% over the May quarter and are up by 2.3% over the year to May. In fact, Canberra recorded its highest ever median house price over the June quarter. And house loans for owner occupiers are up nearly 14% over the first four months of 2013 compared to the same period last year.
Andrew Wilson, APM senior economist, says improvement in the local economy is a significant factor in the increased buyer activity and prices growth, with the latest ABS data reporting a fall in the monthly unemployment rate from 4.7% to 3.9% over May.
However, the shadow cast by the public sector cutbacks that it is generally believed will follow the upcoming federal election continues to loom over the Canberra property market.
Deloitte Access Economics partner Chris Richardson says Canberra has benefited from lower interest rates and the fact that, to date, federal cost cutting has been more talk than action. “That’s good news for now, though chances are whoever wins the election will have to institute cutbacks that may weigh more on the outlook for the ACT.”
Despite some recent policy decisions that will add to federal spending, Richardson says that, whatever the election outcome, potential budget cutbacks do pose a threat to the outlook for the ACT. “Canberra’s private sector employment base should do alright, but the bigger question mark is what happens to the share of the employment base tied to the public sector.”
However, Deloitte’s forecast actually projects the level of jobs in the ACT to grow marginally over the next few years. According to Richardson, in any coming cutbacks there will be more older workers keen to take up redundancies, and the chances are that more of them will choose to stay in Canberra than did during the federal cutbacks of the mid-1990s.
While current indicators – like population growth and mortgage interest rates – are positive, the longer-term outlook will turn on the post-election environment, he continues. “These forecasts therefore show a period of gradual easing in housing demand, but sharp cuts into the federal public service would result in a much weaker outcome.”
The mortgage belt
Richardson describes Canberra as “one big mortgage belt”, with more than half the homes in Tuggeranong and Gungahlin under a mortgage. This assertion is confirmed by recent ABS data in their new Perspectives on Regional Australia report, which shows that the proportion of property owners with a mortgage is highest in the ACT, at 38.9%.
Property experts say ACT property buyers generally have to meet a higher entry-point price than in other regions, and this means mortgages tend to be held for longer.
Suburb to watch
Situated in the inner north of Canberra, Watson is a leafy, well-established suburb offering plenty of choice for investors. Affordable and with good proximity to all parts of the city, Watson’s open spaces – like Exhibition Park – and iconic natural scenery – like Mount Majura and Mount Ainslie Nature Reserve – make it particularly attractive.
Michael McReynolds, from Luton, says there is a real mixture of properties available. “You can pretty much get whatever you want, from four- or five-bedroom homes to two-bedroom apartments, though there are not too many one-bedroom options; and this includes brand new, fully renovated and unrenovated private homes and ex-government homes.”
Along with easy access to the Federal Highway, major link roads and the bus system, Watson has a wide range of local shops; schools and education facilities, an Arts Centre, and is home to Canberra Technology Park. “It’s a suburb in high demand, yet still somewhat of a ‘hidden’ gem within the broader Canberra market,” McReynolds says.
Watson’s wide choice of property, large blocks of land and accessibility mean that its popularity and its prices will continue to grow, Natalie Kokic Schmidt from Badenoch Real Estate agrees. Its neighbourhood plan for a sustainable future is worth noting, she says. “Watson is ever growing, with plans to build new, modern properties, and the aim to provide a diversity of housing for singles, couples and families as well as different age groups.”
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