Housing affordability continues to fall, putting Canberra on the same track as Melbourne and Sydney
Values keep going up in Australia’s capital, which in combination with Canberra’s hefty land tax could cause demand to dwindle.
Housing affordability in Canberra declined slightly in the March quarter, with the proportion of income required to meet home loans increasing to 19.7% from the previous quarter, according to Malcolm Gunning, president of the Real Estate Institute of Australia.
“In terms of home affordability, prices, rental affordability and rents, it’s tracking in much the same way as Melbourne and Sydney, where you’re seeing vacancy rates rise.”
Homebuyers are taking a strong hit because, with the abolishment of stamp duty, the land tax has steadily increased, Gunning adds.
“The effect will probably be more pronounced when you don’t have the same capital growth,” he says.
What will continue to drive interest in Canberra is its economy. As the city is the centre of Australia’s government, the political sector remains its biggest employer. This attracts demand from those looking to enter this job market.
The proportion of income necessary to meet the median rental rate has not risen significantly, suggesting that the rental market is still in a good place. The findings of CoreLogic’s Total Returns Index for July 2018 indicate that total annual returns in Canberra (7%) decreased compared to the previous year’s 12.8%. Despite the drop, the report noted that returns have remained steady over recent months.
The number of new listings on the market as of July 2018 was also the lowest since 2016. This reduced stock could also explain the stability of the rental market, given demand. By contrast, things are looking more difficult for buyers. CoreLogic suggests the falling stock could be a reaction to declining housing demand, causing potential vendors to refrain from introducing new supply into the market.
The premium sector is recording particularly high sales, however, with 14.1% of house sales being for properties priced at a minimum of $1m. On the flip side, 2.5% of units were sold at this price level, an increase from 1.9% in 2017. This indicates that a reduced number of properties are selling at reasonable prices in this market. Cameron Kusher, CoreLogic research analyst, highlights Charnwood as the sole suburb with houses priced at a median of under $500,000.
SUBURB TO WATCH
KAMBAH: Houses the property of choice
A suburb situated at the very tip of Tuggeranong, Kambah ticks the boxes – it’s a growing market with long-term potential and strong yields.
Following an 8.1% increase in prices over the 12 months to July 2018, the median house value hit $584,505. This type of dwelling is clearly the top seller in this market, with 170 houses sold in the May 2017/18 period, against 45 units sold. Despite the price tag, vendors have been able to unload properties at a low discount of under 3%.
Kambah is regarded as the biggest suburb in Canberra, and was the first suburb established in Tuggeranong. Amenities include Kambah Village Shopping Centre and several primary schools.
Amenities: Kambah has a number of primary schools and a shopping centre
Growth: The housing market has maintained a positive five-year growth trend
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