Growth slows as election creeps closer
More than 6,000 jobs are potentially on the chopping block in Canberra, promoting a flat property market while locals wait for the results of the upcoming federal election.
If you’re employed by the government and live in Canberra, it’s a safe bet you won’t be taking out a mortgage soon. Canberra’s primary industry is essentially centred in politics, and up to 6,400 public service jobs could be shed by year’s end, depending on which political party wins the September federal election.
“Over the long term, Canberra has broadly performed well – it’s historically been a strong market for capital growth, and one of the most consistent performers of any major city in Australia,” says Andrew Peterson from NextHotspot.com.au.
“One of the reasons it’s been so resilient is that the primary business of Canberra is government, and there are no recessions in bureaucracy.”
About as close as Canberra gets to a recession, however, is when there are large-scale layoffs in the public service.
“It’s a widely held view that the Howard government’s sacking of over 10,000 public servants in 1996/97 was
largely responsible for a decrease in Canberra’s house pricing, which dropped 20% in some areas at the time,” Peterson says.
“There’s a better than even chance that we’ll get a coalition government this year, and Tony Abbott believes we’re about 20,000 public servants too heavy.”
Of those 20,000 public service roles, around 6,400 are based in Canberra, meaning that around 4% of the local workforce will be looking for a job.
That doesn’t mean investors should shy away from Canberra altogether, Peterson clarifies: the city has been
“resilient in its long-term growth, and it still outperforms most other capital cities”, he says. Peterson adds that worthwhile opportunities may still crop up, but investors should be patient. “Prices aren’t
going to jump in a hurry,” he says. “I certainly don’t think you’ll lose anything by holding off, but there’s a fair chance you may get something a bit cheaper if you wait until later in the year.”
Supply vs demand
The 2013 federal election isn’t the only potential spanner in the works for Canberra’s housing market.
Unlike most other states, which suffer from underlying housing shortages, the ACT has addressed housing market imbalances, with the State Government releasing adequate land to meet previously
strong demand. As a result, Cherelle Murphy, senior economist at ANZ, says housing demand is now softer, while rental vacancies are on the rise.
“The underlying housing market is now in a small surplus situation, which is likely to result in flat house prices near term,” she says.
Murphy further forecasts flat growth for the foreseeable future. “We expect growth of 2% in 2012/13 and 1% in 2013/14, when the full fiscal consolidation comes into effect,” she says.
A few kilometres southwest of Canberra in the Woden Valley district lies Pearce, a central, familyfriendly neighbourhood that is fast gaining a reputation in property circles as an elite address.
“Pearce is a very sought after suburb … [that] many would say is fast becoming the ‘premier’ suburb of Woden,” explains real estate agent Scott Crossman from Ray White, Woden.
“Nestled at the foot of Mount Taylor and still walking distance to Woden Plaza (now known as Westfield Woden), the suburb provides the very best of everything Canberra has to offer: excellent schools, coupled with the local shopping centre that boasts an international food flavour, and great coffee from Deeks are all only minutes away.”
Home to around 2,600 people, Pearce is characterised primarily by stand-alone houses, although there is
the opportunity to enter the market at a more affordable price point with a unit or townhouse. Roughly 30% of local residents are tenants, ensuring a robust rental market for landlords.