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House prices in the nation’s capital

John McGrath
Thursday, November 29, 2018

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The rate of growth in Canberra’s market slowed in FY18 but the city is expecting its fifth consecutive year of price rises in FY19, driven by above average population growth, limited supply of greenfield land for new housing, ongoing job security and the country’s highest wages.

 CoreLogic figures show the median house price rose by 3.3% to $674,000 in FY18, a deceleration on FY17 (9.7%) that is largely attributable to tighter lending restrictions, which are impacting every major market across Australia.

Economic forecaster BIS Oxford Economics says Canberra house prices will continue to rise at a slow and steady pace through to 2021, with 10% capital growth predicted – the second highest rate of forecasted growth in the country behind Brisbane at 13%. 

As discussed in our recently released annual McGrath Report, the most exciting thing happening in Canberra is the prospect of significant zoning changes that will reshape the city’s largely single level housing landscape to better meet the needs of residents in the future.

Strong population growth, limited greenfield sites for new homes and an impending wave of downsizing are prompting city planners to begin preparing for a ‘more compact city’ with higher density living.

The community’s desire for greater diversity of housing options was acknowledged in The Australian Capital Territory Government Housing Choices Discussion Paper, released in November 2017.

The territory’s residential stock is 81% separate dwellings, which has served the city well in the past but does not suit its rapidly changing community profile. Canberra has one of the fasting ageing populations in the country and single and couple-only households are becoming far more prevalent.

The apartment construction boom has met some of this demand but it has mostly been in town centres and along major transport routes, which does not serve the 50% of residents surveyed who would like to downsize in their existing suburban communities as they age but have little to no small home options.

This is a significant consideration for planners, given Canberra is expecting a 93% increase in over 65s by 2041.

There is a clear preference amongst residents for more terraces, townhouses and dual occupancies in established areas close to the city.

Infill development in the inner north and inner south has been a success, with valuations firm Herron Todd White noting particularly strong price growth in the inner north in 2018 due to the rising mix of housing, the intrinsic appeal of the leafy district and the buzz over the new light rail.

The challenge for the government is to meet the needs of its changing community whilst also maintaining Canberra’s character as a garden city. 

Canberra’s median apartment price decreased -0.8% to $438,000 in FY18, with demand still high enough to meet new levels of supply even with a drop-off in investor activity.

The city has seen significant development, with 6,700 new apartments still in the pipeline until the end of FY20, according to forecasts from Master Builders Australia.

For now, there is enough interest from local, interstate and foreign investors as well as younger generations to keep prices stable.

The vacancy rate remains extremely low, there is a strong tenant base of public servants and yields are very appealing at 5.7% – the highest amongst the East Coast capitals.

Premium developments are attracting the strongest enquiry. Local developer, Geocon sold 500 apartments pre-launch in its luxury High Society 27-storey twin tower project at Belconnen in July 2018. Earlier in the year, they sold 250 apartments in one night at the launch of Grand Central Towers in Woden.

A temporary oversupply might eventuate, given weakening investor demand and the cultural challenge of a city that is unaccustomed to apartment living.

First home buyer activity in Canberra peaked at 25% of new loans in early 2018 – the highest it has been since 2009 and well above its long-term average of 19%. From 1 July 2019, first home buyers with a household income under $160,000 will pay no stamp duty on new or established properties.

The long-term fundamentals underpinning Canberra’s property market remain strong. The territory’s population grew by 2.2% in CY17 – well above its long-term trend of 1.5%. It is forecast to grow by 1.75% in FY19 and FY20 before returning to 1.5% thereafter.

Employment is forecast to grow by 2% in FY19, before returning to trend growth of 1.5%.

Canberrans continue to enjoy high incomes averaging $1,016 per week. Jobs growth has attracted new residents, with Canberra amongst the top 10 destinations for all capital city migrants in FY17. It welcomed 12,000 people from the other capitals, including 5,200 from Sydney.

Canberra is quickly maturing into a major metropolitan city. One of the biggest transport projects in its history will launch next month, with the gleaming new light rail corridors snaking through Canberra’s north linking the fast-growing Gungahlin region to the city.

More international flights are opening tourism and trade opportunities, with Singapore Airlines and Qatar Airways flying daily from Canberra to Singapore and Doha. Tourism is up and international education has become the city’s largest services export, with 17,000 overseas students studying there.

The City Renewal Authority, established in 2017, is reviving London Circuit with new office space, a hotel, and retailers, as well as transforming the 19-hectare Haig Park into a more socially active recreational zone.

Published: Thursday, November 29, 2018

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