Despite a lag in new developments, Canberra’s property market is poised to strengthen. Home and unit prices across the capital are beginning to gather momentum in an upward surge.
House values in Canberra are forecast by the Housing Industry Association (HIA), to rise by 9.9% over the 2015-16 financial year. The September Outlook Report by the HIA also revealed that Canberra is expected to have a 20.8% property price rise over the 2016-17 financial year.
While house prices have increased by 5.1% from January 2015 to October, unit prices fell by 2.5% over the same time. Canberra’s median house price, according to Domain, has risen by 4.3% over the December 2015 quarter to $652,307. This being the highest quarterly rise for the capital since December 2007.
During 2015, Canberra’s house prices rose by 9.0%, just behind Sydney’s now fading market, which declined by 3.1% over the same period. Despite Canberra recording a strong price growth over 2015, prices in the capital increased by only 14.5% over the last 5 years. In comparison, Sydney home prices rose by 56.5% over the same time. Just how much Canberra home prices will rise depends on the performance of the local economy.
The unit market in Canberra is slower than the home market. While units have been falling in price, the December quarter recorded a price increase of 0.8% with the unit median rising to $405,110.
However, despite this rise in December, Canberra unit prices fell by 2.2% over 2015, this came after a 0.3% fall was recorded in 2014. Many property experts suggest these falls resulted as many new apartments were built in the area, which increased supply and decreased demand.
The number of homes built in Canberra during the 2014-15 financial year numbered 3875, this was the lowest level of activity recorded over the last 5 years. Building activity peaked in the capital in the 2010-11 financial year when over 5,000 homes were built. However, the HIA currently view the level of construction as being positive.
Another factor that needs to be considered in relation to less construction occurring in Canberra is land supply. The amount of land in Canberra has been constrained while developments are still being approved. At present, it is estimated that there is pent-up demand for new property and it is expected that this will be alleviated as construction work increases over 2016.
The outlook for units and apartments is less promising than homes. It is expected that new building projects will decline by 31% over the year. But, given that there has been quite a high level of activity over the last couple of years this is to be expected.
It’s estimated that the market will experience a short-term oversupply. The local economy is looking favourable with more jobs being created and consumer confidence returning.
Property market experts say that 2015 has been the first year where the market has been spurred-on by end-of-year market activity for quite some time. This indicates that momentum is present in the market. Auction rates have also increased, with numbers being pushed to their highest levels in years.
The Real Estate Institute suggest that this momentum will continue to increase confidence. This, in turn, will result in a stronger property market in 2016.
Property market experts suggest that while Canberra’s property market will continue to strengthen, it won’t be quite as strong as Sydney’s market. However, due to there being a decrease in interest in Sydney, it is expected that investors will start to target areas such as Canberra. This is attributed to the fact that property in this area is more affordable, and rental yields are much higher than Sydney.
If you’re seeking to buy in Canberra, then experts recommend looking in the inner north and southern areas, as prices in this region are starting to react. Sales in these areas have also increased and it’s believed that this will continue throughout 2016.
Falling unit prices in Canberra are also expected to stabilise. Tenants who took advantage of lower rents in 2015, may find that their rents rise considerably in 2016.
Are you thinking of buying a home? Then contact eChoice and find the right home loan for YOU today.