Flat market set to linger longer
Growth in Canberra’s market is stagnating and the market’s cycle is on a downward swing. What does this mean for investors?
It is not an encouraging time for property investors in the federal capital. Thanks to ongoing economic uncertainty and dismal forecasts, it is difficult to see light at the end of the tunnel.
Unfortunately, the latest CoreLogic RP Data Home Value Index results only add to this gloomy picture. They show that Canberra dwelling values fell by 0.3% over November and by 3.3% over the quarter ending November 30. And the market recorded year-on-year growth of just 1.7%.
According to Positive Real Estate coach Elaine Chase, Canberra is sitting at four in its market cycle. Not only does this mean its market is ranked last out of all capital cities, but it indicates a flat market.
Chase says a position of four means there are no growth drivers. “The market isn’t likely to see an increase in value for a long period of time. With no major demand, Canberra will be flat for some time yet.”
The ambiguity surrounding public sector job cuts and their impact on Canberra’s economy and job market has affected demand, and is likely to continue doing so.
Chase says that, once demand has decreased, the property market starts to experience oversupply issues. “Then the market slides backwards before stagnating for some time. This half of the cycle normally takes five to 15 years but can vary tremendously.”
While this analysis might sound off-putting, the latest Herron Todd White report takes a slightly more optimistic view. It notes that land supply releases have been met with stable demand from buyers planning to build, and in the established housing market well-located properties in the sub-$750,000 range are sought after.
“The recent local government announcement to offer a buy back scheme to ACT home owners affected by Mr Fluffy Insulation is expected to increase demand, in the short term, with additional purchasers and renters likely to enter the market,” states the report.
However, it does concede that Canberra’s unit market is feeling the effects of a degree of oversupply.
To further complicate matters, the federal capital’s supply woes could be exacerbated by a mass sell-off of Defence Department land.
With the department under review, one option which has been mooted is a consolidation of its properties. According to recent reports, the department spends over $70m on building eases in Canberra each year. Consolidating this could save millions.
However, if the federal government was then to put a large amount of surplus defence land on the market, it could have a negative impact.
In a submission, the territory’s government warned that any ad hoc land release could negatively impact on urban planning, land sales and future development sequencing in the ACT and the surrounding region. To avoid this, territory planning strategies and the relevant commercial and residential markets should be taken into account, the submission said.
SUBURB TO WATCH
Curtin: Desirable suburb skyrockets
Originally part of Canberra’s first CBD “satellite development”, Curtin celebrated its 50th anniversary in 2014 as one of the most desirable suburbs in its district.
Sitting 7km south of the CBD, its design was influenced by the Radburn town planning model, which is known for its use of communal green space and pedestrian paths. In Curtin, this has resulted in a leafy, family-friendly suburb.
At the same time, it has easy access to the city, along with good local amenities. The Woden Town Centre and Canberra Hospital are close by and function as solid economic drivers.
This combination of characteristics is making Curtin an increasingly attractive proposition for buyers. However, it is the unit sector of the market that is proving most popular. It has been recording excellent growth statistics in recent times, notably a 12-month growth figure of 37% and five-year growth of 21%.
With just 0.64% of stock on the market, there is relatively limited supply, which should assist demand in the future.
One of Curtin’s best streets is James Street, which has views across the Woden Valley to Parliament House and Black Mountain. Indeed, a recent $1.9m sale in the street broke suburb records and highlighted its attributes.
Ayers Place and Carruthers Street are also popular streets due to the convenience of their location.