Is Canberra the next boom town?
Large-scale public sector expansion is underpinning healthy growth in the ACT property market.
Canberra is the emerging star performer on the Residex charts and chief property analyst John Lindeman puts it down to one overriding factor - federal government employment.
"The ACT is a very, very different market to the state capitals," he notes. "It directly responds to the amount of government spending that then produces more [or fewer] public servants required in Canberra."
With early indications that the Rudd Labor government was going to decentralise spending and delegate a number of funding decisions to the states, Lindeman predicted in 2008 that public servant numbers in Canberra would drop off, easing demand on the real estate market.
All of that has now changed. Centralised stimulus programs and infrastructure planning have increased Canberra's population and the housing market is bursting at the seams. "What we're seeing now is a massive increase in contracted public servants in Canberra," says Lindeman. "For the next few years, as all these [government] programs are unleashed, the demand for housing will continue to increase in Canberra."
Michael Wellsmore, president of the Real Estate Institute of the ACT, strikes a more cautious tone. "On balance, taking all things into account, we would not see another big boom coming," he says. "There's definitely a lot of confidence with property that there hasn't been with the share market, but that's because property hasn't dropped 50% in value like some share portfolios have."
Wellsmore reminds investors not to place too much emphasis on any single market driver. "There are some people who are claiming that the market's going to fall apart when the First Home Owner Grant begins to run down," he says. "The market is not a one-trick pony - that's not the only thing that influences the marketplace."
Frustrated developers and investors are growing impatient with the government's slow rate of land release. Despite a marked shortage of new housing, bureaucratic and planning delays are hampering efforts to restore the balance between supply and demand. According to Wellsmore, some changes to the planning procedures have now been implemented, "so we expect to see an improvement in the supply side come through in the next 6-12 months."
In the last quarter, the inner-city unit market saw more moderate growth than the house market, but that may be about to change. "Most of the public servants go [to Canberra] on contract for a couple of years and most prefer unit accommodation close to the CBD or where they work," says Lindeman. "There was a glut of unit development occurring [over the last two years] and that has pretty much now been absorbed."
Further increases to Canberra's population will put renewed pressure on unit prices, as there are now fewer premium sites available to develop.
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