Canberra May 2017

The month in review: Canberra

By Herron Todd White
May 2017

Like most capital cities in Australia, Canberra has seen a significant growth in house sale prices over the past 12 months. This is partly due to low interest rates and a limited supply of houses coming onto the market. It is expected this trend will continue as properties in established suburbs remain tightly held and highly sought after. Currently houses are providing much stronger capital gains than apartments. This is probably due to an oversupply of apartments in the Canberra market and a number of apartment developments beginning construction. These low capital gains look set to continue as new apartment developments are beginning construction in the CBD, Molonglo Valley, Woden, and Gungahlin.

Low interest rates seem to be contributing to the strong housing market we are currently experiencing. An increase in interest rates may see some property owners being stretched financially, which could result in them being forced to sell. If several of these sales are introduced onto the market, it may reduce prices and could represent good buying opportunities. Alternatively, an interest rate rise may force more buyers out of the market which could reduce demand.

Detached houses in established suburbs have been performing very well throughout the ACT recently, due to a perception of low supply and high demand. This trend may slow over the next six to twelve months due to new dwellings built on Mr Fluffy reclaimed blocks coming onto the market. A change in planning regulations allows multiple dwellings to be built on what were previously only single dwelling blocks. This would result in an increase in the number of dwellings in the sought-after established suburbs of Canberra, and may slow the strong capital growth seen lately.

Another factor likely to change the direction of the property market would be changes to legislation. Recently we have seen the stamp duty costs being abolished for properties under $600,000 in Victoria for first-home buyers. There hasn’t been any talk of similar legislation being implemented in the ACT, but if it were it would incentivise first home buyers to enter the market. This could affect the market in several ways. It may help balance the apartment market by providing more demand for an over supplied market. However, in the housing market it would increase demand for what seems to be an under supplied market, therefore increasing prices further.

 

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