As the rest of Australia holds its breath in anticipation of federal elections later this year, the one property market that will arguably be affected the most is Canberra.
Speculation over how much the current government will or won’t spend can vary depending on who is doing the commentating, but the general agreement is that the ACT’s prospects would change significantly were the Coalition to win, as most political pundits currently seem to think.
BIS Shrapnel manager Angie Zigomanis says the Canberra property market has tended to follow a predictable pattern whenever a Labor Government is ousted. This is largely because of the public job shedding that has tended to occur whenever a Liberal-led government has taken power.
“In the early John Howard years, prices went back in the Canberra market and stagnated for a good four or five years,” Zigomanis says. “They went back up with extra defence deployment when the war on terror began, but before that we did go through a period of pretty heavy [job] cuts.”
Since Canberra’s employment market is dominated by the public sector, public job shedding obviously has a marked effect on the ability of many residents to pay their rent. In other words, it hints at trouble for property investors.
Century 21 chairman Charles Tarbey says the risk is hard to deny. Whatever an investor’s political leanings, he says that historical patterns make the issue an unemotional one. People can argue about whether the country as a whole will be better or worse off under either government, but history suggests that the Canberra property market will most likely struggle if the Coalition wins the election.
“Any time the Labor Government comes into power, it’s well known that there’s thousands of [public] jobs created, so you buy houses in Canberra. When they start looking like they’re in trouble, you get out, because public service jobs are going to go. There’s no doubt in my mind that if the Liberals get in, they’re going to put a bit of pressure on,” says Tarbey.
In other, perhaps further reaching developments, Deloitte Access Economics reports in its latest Business Outlook that housing construction within the ACT has been very strong in recent months – bordering on too strong.
“Although renovation work is dropping off, there’s still a slew of new housing construction underway,” it says, adding that housing construction has been stronger for a lot longer than earlier projections had anticipated.
BIS Shrapnel’s Angie Zigomanis believes that this will add up to an impending surplus of properties on the market. “Vacancy rates will edge up, probably to 3%, with an oversupply on the market. That will impact on purchases and see a downside to the Canberra market.”