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High hopes for property in our nation’s capital

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By John McGrath
 
Canberra is on track to record the highest house price growth of all capital cities between now and 2020, with predictions of a 16% increase driven by population growth, continuing high incomes and a reduction in detached housing stock, according to respected analysts, BIS Oxford Economics. 
 
As outlined in our recently released McGrath Report 2018, the national oversupply of apartments will see Canberra become one of only two capital cities with any apartment price growth by 2020, although it will be extremely modest at just 2%.
 
These forecasts signal a continuation of Canberra’s two-tier marketplace, with an acceleration in detached home prices and virtual stagnation in apartment prices.  
 
The city’s typically strong economic performance, coupled with a lack of family home stock for sale, has seen the median house price rise solidly by 6.6% to $650,000 over the year to June 2017, according to CoreLogic.  Apartment price growth was sluggish at just 2.9% to a median $442,500.
 
Market conditions have been strong, with the city recording its highest Winter auction clearance rate since 2009 and the fourth highest clearance on record at 69.2%, according to Domain.  
 
Restricted house stock is attributable to a decline in new construction and the ongoing impact of more than 1,000 asbestos affected ‘Mr Fluffy’ blocks being removed from the market under compulsory acquisition by the ACT Government in 2014. Only 400 remediated blocks have been released back into the market so far.  
 
Lack of stock is also contributing to a projected pick up in the renovations sector after a contraction of 6.1% in FY17. A lack of choice in the marketplace is driving some home buyers to stay put and renovate instead, with the Housing Industry Association forecasting renovations activity to increase by 5.1% during 2017-18.  
 
Apartments and other non-detached housing now account for 80% of dwelling approvals in Canberra, according to the HIA. JLL estimates a pipeline of 7,000 new apartments for the city by 2021.  
 
The apartment market is already considered in oversupply but a low vacancy rate of 1.7%, coupled with strong yields, is keeping apartment prices in slightly positive growth territory.  
 
Canberra’s median rent of $420 per week and median yield of 4.9% is expected to continue rising in the short term due to population growth, relatively low numbers of first home buyers and an underlying shortage of rental accommodation.  
 
The ACT recorded 11% population growth between 2011-2016, the largest of all states and territories and equivalent to more than 40,000 new residents, according to the Australian Bureau of Statistics (ABS). Gungahlin was Australia’s second fastest growing regional area with the residential population up from 47,000 in 2011 to 71,000 today.  
 
Latest ACT Government modelling predicts further strong population growth of 6% in Canberra by 2020. About 60% of this growth will be driven by natural increase (births minus deaths) and around 40% through net overseas and interstate migration.  
 
This growth is being supported by major new public projects like the $700 million citywide light rail network, with the first stage connecting the CBD and Gungahlin next year; and a revitalisation of the city precinct.  
 
The City Renewal Authority, established in July 2017, will lead the transformation of central Canberra including Civic, Northbourne Avenue, Dickson, Haig Park and West Basin, with $59 million over four years allocated in the 2017 state budget to begin works.  
 
The government is also looking to hire the city’s first chief engineer to oversee Canberra’s strategic development as the city continues to grow and renew.  
 
A big ticket housing project for 2017-18 will be the replacement of the Red Hill public housing units in the prized inner south. The new residential development will include 108 single dwelling sites, four multi-unit sites and six green spaces. Another 92 townhouses and apartments are planned for three blocks in Holder, Chapman and Wright.  
 
With its selection of art galleries and vibrant restaurant scene, Canberra is shedding its stuffy reputation and becoming an attractive lifestyle and cultural destination. Just last month Lonely Planet, one of the words leading authorities on travel, named Canberra third in the world’s Top 10 Cities 2018 – ranking higher than any Australian city has ever been ranked before in the travel publisher’s annual Top 10 Best in Travel lists. This bodes well for our nation’s capital.

Published: Tuesday, November 28, 2017


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