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When is a good time to buy property in Canberra?

By 15 May 2014 28

I’m looking into buying my first home in Canberra and have been reading all about the predicted property price declines as a result of the 2014 budget. If house prices in Canberra crash, it will be a great time to buy. A work colleague described it as a “once in a generational opportunity to buy cheaply in Canberra”. But when (exactly) is the best time to buy in Canberra? Is it now? Or in the next few months when the cuts really start to hit home? I’m keen to pick up a bargain! :)

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28 Responses to When is a good time to buy property in Canberra?
#1
Holden Caulfield11:00 am, 15 May 14

Prices may drop, but I’m not sure your expectations should be to pick up a $650K house for $400K, for example.

Do you want a house or would an apartment be okay? If the latter it can be advantageous to purchase off the plan as you can sometimes buy a bit cheaper then.

If you want a house just keep an eye on the areas you’re interested in, go to open houses and auctions etc, you’ll quickly get a sense of what’s good value and what’s not.

#2
VYBerlinaV8_is_back11:16 am, 15 May 14

We’ve already had most of the ‘crash’. Even in 1996, when the ax was taken to the PS in greater (relatively) amounts than now, property didn’t crash.

The trouble in Canberra is that there is a lot of c#$p property in the market, especially in the outer suburbs. I’d suggest getting your finance organised and starting to look at areas you’d like to live, get a feel for prices and availability, then when you see something you like swoop in quick and make an offer (try lowballing a few and see how you go).

As many here know, I’m a property investor, and I’m keeping a close eye with a view to buying in in perhaps 2-3 years time. I expect Canberra properties to be about double their current prices by 2030 (in nominal terms).

#3
curmudgery11:43 am, 15 May 14

Picking the peaks and troughs of a market is never straightforward. Perhaps someone in the ABS could help you.

#4
teejay12:03 pm, 15 May 14

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

That’s what I was thinking too. I think now would be a good time to buy property. Don’t wait until people are calling “the property market is recovering” because by then it is too late!

#5
Maya12312:07 pm, 15 May 14

I bought an investment property during the last property slump, when Howard was in. It was a very good buy in an inner suburb, and I was very lucky. I didn’t get the bottom of the trough, but just as prices began to rise. Six months earlier, the same design house in the area sold for 25% less, but still three months after I bought the house, a similar house sold for 25% more. I bought it just in time; while I could still afford it. If there is a slump like last time there might be bargains again. But know the market. At the time I did and because the market was extremely weak I was the only bidder and was able to negotiate thousands off the reserve price. But only I suspect because I knew what other similar houses in the area had sold for and was able to use the prices they went for as a bargaining tool.

#6
VYBerlinaV8_is_back1:18 pm, 15 May 14

teejay said :

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

That’s what I was thinking too. I think now would be a good time to buy property. Don’t wait until people are calling “the property market is recovering” because by then it is too late!

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

#7
davo1011:51 pm, 15 May 14

VYBerlinaV8_is_back said :

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

Given that in real terms the established house price index in Canberra is back to where it was in September 2007, you’ve got plenty of time. In fact since March 2010 the established house price index has gone nowhere (March 2010: 102.0 March 2014: 101.5) in nominal terms.

#8
VYBerlinaV8_is_back2:53 pm, 15 May 14

davo101 said :

VYBerlinaV8_is_back said :

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

Given that in real terms the established house price index in Canberra is back to where it was in September 2007, you’ve got plenty of time. In fact since March 2010 the established house price index has gone nowhere (March 2010: 102.0 March 2014: 101.5) in nominal terms.

That’s right. Reduction in real prices through inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices) is the bit the people who believe there will be a crash tend to miss.

#9
davo1013:42 pm, 15 May 14

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

#10
VYBerlinaV8_is_back4:23 pm, 15 May 14

davo101 said :

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

Interest compensates the lender for loss of value of the borrowed money due to inflation, plus some for profit. This simply translates to their being a ‘cost’ for borrowing the money. Equally, a non homeowner pays rent as the cost of shelter. The difference, though, is that the loan amount of the buyer is fixed at a point in time, and reduces in real terms going forward, whereas the rent tends to rise with inflation.

In the real world there are some slight variances (e.g. interest rate changes, CPI changes, etc), but the basic effect is there.

Inflation has definitely made my payments easier than they were in the past. And the difference between payments at what is effectively a fixed level and rising rents has meant my tenants now pay all my holding costs for my investment properties.

Good buying plus plenty of time equals low cost of housing going forward.

#11
milkman6:40 pm, 15 May 14

+1 for no crash. We’ll be at decade lows within the next year or two then it will be up up up from there.

#12
bigred6:51 pm, 15 May 14

VYBerlinaV8_is_back said :

davo101 said :

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

Interest compensates the lender for loss of value of the borrowed money due to inflation, plus some for profit. This simply translates to their being a ‘cost’ for borrowing the money. Equally, a non homeowner pays rent as the cost of shelter. The difference, though, is that the loan amount of the buyer is fixed at a point in time, and reduces in real terms going forward, whereas the rent tends to rise with inflation.

In the real world there are some slight variances (e.g. interest rate changes, CPI changes, etc), but the basic effect is there.

Inflation has definitely made my payments easier than they were in the past. And the difference between payments at what is effectively a fixed level and rising rents has meant my tenants now pay all my holding costs for my investment properties.

Good buying plus plenty of time equals low cost of housing going forward.

If you are living in cheap digs, why not buy and let the tenant meet the better part of your costs? If you look hard enough there are properties out there that are renting for just under or over the costs of ownership.

#13
Masquara6:59 pm, 15 May 14

The outer suburbs and Gungahlin may crash, but the inner areas will probably keep their value.

#14
MosesK7:02 pm, 15 May 14

Some very sensible posts here, IMO.

I agree there will be no immediate or drastic drop in prices. The budget’s APS cuts are not as bad as the CT is making it out. In fact, the largest threat to house prices will probably come from the CT’s hyperbolic talking down of Canberra’s economy!

As has been pointed out above, house prices have, in real, inflation-adjusted terms, been declining for 3 years. The APS cuts have already been priced in to a significant extent. Good interest rates, low supply and PSS retirees taking VRs should help sustain the market.

I think the stagnation will continue — and outer suburbs, new developments and apartments will be particularly vulnerable. But the established suburbs should come through it ok. Now is a good time to enter the market, but you have time on your side. That gives you the luxury to examine the market carefully and wait for a very good deal.

#15
Masquara7:15 pm, 15 May 14

A “bargain” isn’t necessarily a cheap property.

#16
arescarti428:50 pm, 15 May 14

My advice is wait and see, the fundamentals are basically the opposite to that which drove the unprecedented boom from ~1995-2010.

We’ve got public service job cuts, rising unemployment, high levels of new housing supply, low levels of population growth, and the lowest levels of income growth in half a century lined up.

Even with interest rates at record lows, it’s still considerably cheaper to rent, so why would you want pay a premium to buy now?

That said I think it’s unlikely the budget alone will cause a crash, the crash will come with some major external shock to the Australian economy, and when it does, it wont be just limited to Canberra.

#17
Very Busy9:47 pm, 15 May 14

arescarti42 said :

My advice is wait and see, the fundamentals are basically the opposite to that which drove the unprecedented boom from ~1995-2010.

We’ve got public service job cuts, rising unemployment, high levels of new housing supply, low levels of population growth, and the lowest levels of income growth in half a century lined up.

We also have Sydney prices coming off the boil which could have a flow on effect here.

I’m certain that the rises we saw a decade ago are something that will not be seen again for decades. Those rises we saw back then, combined with the ever increasing cost of utilities have effectively taken a large percentage of potential buyers out of the owner occupier market. This helps to contribute to keeping demand and supply in check, combined with the other factors mentioned above by arescarti42.

Nobody giving advice here has asked you for more information. To properly advise you we need to know what your situation is. I can only assume that you will be an owner occupier, or are you looking to buy only for investment purposes, or both. Do you have cheap accommodation at present, such as living at home with your parents, or are you forking out for rent. Married with two incomes? kids? etc.

Prices certainly haven’t come down anywhere near enough for me to say “yeh jump in now regardless of your personal circumstances”

#18
justsomeaussie9:51 pm, 15 May 14

I would highly recommend people do their own research with sites like:
http://www.sqmresearch.com.au/graph_stock_on_market.php?region=act%3A%3ACanberra&type=c&t=1

For me, the Canberra market is highly oversupplied with 2 bedroom apartments and with many more developments still happening combined with limited people entering the market should mean some good buys from distressed buyers whose negative gearing gambles have backfired.

#19
VYBerlinaV8_is_back9:12 am, 16 May 14

Very Busy said :

Nobody giving advice here has asked you for more information. To properly advise you we need to know what your situation is.

That’s because no-one is (or should be) giving advice. This is just the opinions of some people with varying levels of interest in the topic.

#20
Az9:35 am, 16 May 14

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

No, we haven’t. That’s real estate agent talk.

Unless a few plane loads of Chinese investors swoop in (always possible), market is going to tank severely. It just has to reach it’s stress point. Most people don’t want it to tank and that’s about all that’s keeping it up at the moment, belief. But as the cuts really bite, you’ll see a gradual realisation that things do not always go up. (Remembers there’s also the efficiency dividend increase piled on top the main cuts.)

Also, we’re due a GFC2 any day now as the Yanks’ funny money program comes home to roost. Combo of that and Abbott’s cuts could make housing very affordable depending how much the Australian housing bubble is impacted. Enjoy.

#21
Very Busy10:21 am, 16 May 14

VYBerlinaV8_is_back said :

Very Busy said :

Nobody giving advice here has asked you for more information. To properly advise you we need to know what your situation is.

That’s because no-one is (or should be) giving advice. This is just the opinions of some people with varying levels of interest in the topic.

Advice, opinions, suggestions – in the context of a public forum they’re all the same thing VY.

#22
VYBerlinaV8_is_back10:48 am, 16 May 14

Az said :

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

No, we haven’t. That’s real estate agent talk.

Unless a few plane loads of Chinese investors swoop in (always possible), market is going to tank severely. It just has to reach it’s stress point. Most people don’t want it to tank and that’s about all that’s keeping it up at the moment, belief. But as the cuts really bite, you’ll see a gradual realisation that things do not always go up. (Remembers there’s also the efficiency dividend increase piled on top the main cuts.)

Also, we’re due a GFC2 any day now as the Yanks’ funny money program comes home to roost. Combo of that and Abbott’s cuts could make housing very affordable depending how much the Australian housing bubble is impacted. Enjoy.

Completely disagree. We’ve already seen plenty of evidence that the government will stimulate in the event of a major economic problem, and we have plenty of room to move on interest rates still, and plenty of space on the credit card (so to speak).

Property has been stagnating for several years, replacement costs are high while quality is low, and we haven’t been building many houses for some time now.

If property was going to crash it would have done so during the GFC, but it didn’t. And it won’t now. It’s not real estate agent talk, it’s common sense. The crash-spruikers have been telling us the big crash is right around the corner for 10 years now, and their position is less valid now than it was 5 years ago.

#23
Az1:49 pm, 16 May 14

VYBerlinaV8_is_back said :

Completely disagree. We’ve already seen plenty of evidence that the government will stimulate in the event of a major economic problem, and we have plenty of room to move on interest rates still, and plenty of space on the credit card (so to speak).

Property has been stagnating for several years, replacement costs are high while quality is low, and we haven’t been building many houses for some time now.

If property was going to crash it would have done so during the GFC, but it didn’t. And it won’t now. It’s not real estate agent talk, it’s common sense. The crash-spruikers have been telling us the big crash is right around the corner for 10 years now, and their position is less valid now than it was 5 years ago.

All good points, except we’re talking about Canberra.

Rip billions out of any economy and it has a knock on effect (just as pumping billions in got us to where we are). Prices can’t just sit around stagnating when the market loses so many potential buyers along with their regular incomes.

Let’s be conservative – Only 4,000 jobs are lost locally and let’s underestimate their incomes at 60,000 pa. That’s a quarter of a billion sucked out of the local economy per year. Hold ya house prices up in that environment.

#24
Tetranitrate2:03 pm, 16 May 14

VYBerlinaV8_is_back said :

Az said :

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

No, we haven’t. That’s real estate agent talk.

Unless a few plane loads of Chinese investors swoop in (always possible), market is going to tank severely. It just has to reach it’s stress point. Most people don’t want it to tank and that’s about all that’s keeping it up at the moment, belief. But as the cuts really bite, you’ll see a gradual realisation that things do not always go up. (Remembers there’s also the efficiency dividend increase piled on top the main cuts.)

Also, we’re due a GFC2 any day now as the Yanks’ funny money program comes home to roost. Combo of that and Abbott’s cuts could make housing very affordable depending how much the Australian housing bubble is impacted. Enjoy.

Completely disagree. We’ve already seen plenty of evidence that the government will stimulate in the event of a major economic problem, and we have plenty of room to move on interest rates still, and plenty of space on the credit card (so to speak).

Property has been stagnating for several years, replacement costs are high while quality is low, and we haven’t been building many houses for some time now.

If property was going to crash it would have done so during the GFC, but it didn’t. And it won’t now. It’s not real estate agent talk, it’s common sense. The crash-spruikers have been telling us the big crash is right around the corner for 10 years now, and their position is less valid now than it was 5 years ago.

Err… you know the government spent billions on boosting first home buyers grants precisely to prevent a housing crash during the GFC, right?

#25
arescarti422:06 pm, 16 May 14

VYBerlinaV8_is_back said :

We’ve already seen plenty of evidence that the government will stimulate in the event of a major economic problem, and we have plenty of room to move on interest rates still, and plenty of space on the credit card (so to speak).

This is not 2008 anymore. The Government doesn’t have anywhere near the ammo that it had back then coming off the back of 15 years strong growth. Also you may not have noticed, but the current lot in Government aren’t exactly Keynesian spendthrifts.

Similarly the RBA has spent most of its rate cut ammo already, there might be a few bullets left but too much lower and the cash funding our CAD will flee and dollar will collapse. It’s true that Government debt is low by international standards, but it needs to be as the Government is implicitly backing our world leading private debt. Without the Government guarantee, our banks would lose their AAA ratings and cheap international funding.

VYBerlinaV8_is_back said :

Property has been stagnating for several years, replacement costs are high while quality is low, and we haven’t been building many houses for some time now.

If you look at the ABS dwelling data, in the ACT we’re currently building around double the long run average, and new supply has been well and truly elevated for about 4 years.

VYBerlinaV8_is_back said :

If property was going to crash it would have done so during the GFC, but it didn’t. And it won’t now. It’s not real estate agent talk, it’s common sense. The crash-spruikers have been telling us the big crash is right around the corner for 10 years now, and their position is less valid now than it was 5 years ago.

I think it’s becoming increasingly obvious that Australia didn’t avoid the GFC, we just managed to kick the can down the road. Unemployment here is now higher than it was during the GFC, and it’s projected to continue going up. The mining boom has been the only thing separating Australia from all the other high cost, low productivity, massive debt countries around the world, and it’s only just starting to wind up.

I’d say the likelihood of a crash is much higher now than it has been at any point over the last 15 years.

#26
justsomeaussie3:06 pm, 16 May 14

One day Governments will wake up and realise that giving free money out to buyers only pushes prices higher thereby actually giving the the money to the sellers.

Go and ask your Real Estate Agent about the term “build into the price”.

The more demand they create, the more the market will respond with higher prices. All the Government has done with first home buyer/builder grants and concessions is trick younger people into thinking that they can actually afford to get into the market and transfer their wealth into the older few who are selling.

#27
VYBerlinaV8_is_back3:27 pm, 16 May 14

@arescarti:

So the government hasn’t got any money to stimulate, and yet we keep hearing, from multiple sources, how our government debt is super low by world standards and we shouldn’t be curtailing spending. Hmmm.

And our interest rates could easily drop further if need be. If the dollar drops all of a sudden our exports will be more competitive.

And as far as building, what is it that we’ve been building? Family homes? Or perhaps McMansions and luxury 2 bedroom units?

If push came to shove, the feds could easily give housing a shove along. And in order to prevent a crash, they would. After all, what happens when property crashes? The economy drops its bundle, as per the experience of countries such as Ireland and the US, and we end up with widespread unemployment and spiraling government debt.

#28
arescarti423:37 pm, 16 May 14

justsomeaussie said :

One day Governments will wake up and realise that giving free money out to buyers only pushes prices higher thereby actually giving the the money to the sellers.

Call me cynical, but Governments have always known this, it’s the first home buyers that need to wake up to the fact that they’re being played.

justsomeaussie said :

All the Government has done with first home buyer/builder grants and concessions is trick younger people into thinking that they can actually afford to get into the market and transfer their wealth into the older few who are selling.

I reckon that’s been the point all along, ‘improving affordability’ has just been a convenient guise.

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