The month in review: Canberra
By Herron Todd White
The Canberra residential market experienced a period of relative stability in 2015. While market sentiment suffered initially from cutbacks to the public sector in 2014, consumer confidence has strengthened as the economic outlook continues to improve.
Low interest rates and consistently low unemployment levels have continued to be the major drivers in the Canberra residential marketplace. At a macro level supply levels continue to be relatively strong compared to previous market peaks, providing greater choice to a predominantly buyer’s market. New housing continues to be more sought after compared to established homes with supply concentrated in the Weston Creek suburbs of Wright and Coombs as well as the Gungahlin suburbs of Bonner, Casey, Moncrieff, Ngunnawal and Crace.
The increase in stock levels combined with limited population growth has resulted in limited price growth and a softening in rents by as much as 10% across the board, with investors being forced to adjust rental expectations to avoid an increase in vacancy rates as well as facing more stringent lending criteria.
There are a number of factors which will continue to play a pivotal role in 2016. The demolition and staged remuneration of the Mr. Fluffy loose fill asbestos properties will provide vacant blocks in established and often desirable locations. This coupled with the proposed zoning variations to allow for more dual occupancy sites will aid in sating the demand for housing in the mid to high market point. The residential unit market presents its own unique concerns. The threat of oversaturation is a very real one and continues to be observed in several market segments including the Flemington Road corridor in Gungahlin and the Belconnen Town Centre.
We anticipate 2016 will be a year of flat growth with demand shifting further away from the unit market in most segments and towards new detached houses.
If the economic outlook continues to strengthen, it is possible the Reserve Bank may increase rates, which would have a significant impact on overall affordability.