The recently released Real Estate Market Facts Report, commissioned by the Real Estate Institute of Australia (REIA), has shown Canberra house prices in the most recent quarter are down 1.5% on the same period last year. Meanwhile, prices for apartments and other dwellings are down 5.9%.
Craig Bright, director of the Real Estate Institute of the ACT (REIACT), believes the negative period presents investors and upgraders with some unique opportunities in the local market. Especially considering that the REIA report showed that, compared to other states and territories, the ACT recorded the second-highest average annual return for three-bedroom houses and the highest annual yield for two-bedroom apartments.
“The small [recent] drop in median prices makes it a good time for investors to consider buying a house or apartment in Canberra, as rental returns are very strong here,” Bright says. “Some of the greatest returns in Australia are being achieved by people who own rental properties in the ACT.”
Bright also believes that upgraders should seize the chance to get closer to the CBD.
“The biggest fall in median house prices over the quarter was in inner central, which includes North and South Canberra,” he says. “Sales in the ACT are still strong, with over a thousand properties selling over the period…There are still lots of buyers and house prices are relatively stable.”
Sought-after suburbs within 1km of the CBD, such as Reid, Turner, O’Connor and Braddon, have all experienced substantial drops in median price over the past year, according to RP Data.
Tight belts for the public sector
Potential ACT investors are expressing concerns about the future of the public sector, which is the territory’s majority economic driver. The federal government has announced a number of job cuts for public servants, in a bid to deliver a budget surplus in 2013.
ANZ head of property research Paul Braddick believes such departmental austerity measures are likely to get worse before they get better.
“You’ve already got the Labor Government taking something like 2.5% out of the national economy through a tightening of fiscal policy over the next couple of years,” Braddick says. “Then, the current political situation would suggest there’s going to be a change of government and, if anything, the Coalition has historically been even tighter on their budget positions than Labor. If there is a change in the next year or so, overall spending will be weaker and public sector employment will be weaker.”
Afforded at all costs
The upside of any value drop is that Canberra’s impressive affordability levels will be enhanced. The REIA March Quarter Housing Affordability Report found that in the ACT, the proportion of income required to meet rental repayments decreased by 0.3 percentage points over the quarter to 18.3%.
While this is 13.7% lower than the national average of 32%, Braddick warns that territory incomes are higher than the national average.
“It’s interesting because the level of their house prices is almost the highest in the country, yet when you measure affordability against income, they’re the most affordable in the country,” Braddick says. “Generally, people earn a lot more.”
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