It may be the strongest urban market, but is Canberra in danger of becoming a one-horse town? The federal capital may be the centre of the Australian government, but at present it’s also the centre of something else: Australia’s urban property markets.
According to RP Data figures, Canberra is the only capital city to experience an increase in the median dwelling price in the 12 months to May 2011. Admittedly, it’s minimal growth – just 0.8% – but the fact that values haven’t gone backwards is something of an achievement in current market conditions. APM senior economist Andrew Wilson reckons that the strong overall performance is explained by the ACT’s particular economic circumstances.
“Canberra just keeps on keeping on – it’s the golden child. That’s because it has a very strong mid-price market [due to government employment],” he explains. “It also doesn’t really have the volatile prestige market that Sydney does. Activity in that middle level is driving growth, along with the shortage of housing, low unemployment and income growth.”
However, not all of the Canberran market is performing so well. RP Data also recorded a 2.5% fall in the median unit price in the year to May 2011. BIS Shrapnel project manager Angie Zigomanis believes this could be due to a looming oversupply.
“The ACT has been building a lot in the apartment sector – possibly too much,” he says. Zigomanis also believes that the reason for Canberra’s success – the presence of the federal government – could also be a risk to the market.
“Price growth has been supported a lot by government employment, which has been pretty healthy because of stimulus programs,” he adds. “The question mark for us is how aggressively the federal government tries to get the budget back into balance. If there is a decline in job numbers, then we could see prices go backwards.”
Zigomanis isn’t alone in his pessimism. A report from Deloitte Access Economics also points to the importance of the government to Canberra’s economy as a potential problem, and argues that the ACT risks becoming a ‘one-company town’. It comments that one in two workers are employed in the public sector – the highest rate since the 1980s. A slump in government spending, could have a significant impact on Canberra, and that’s a risk that investors in the federal capital should bear in mind.
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