Canberra home prices surge back in March as rents stay high

Canberra home prices kicked back in March after a stutter earlier in the quarter, rising 0.2 per cent to bring the median property price to $591,492, amid increasing concerns about affordability.

Rents also remained high, despite a slight fall in the quarter for houses.

The CoreLogic Hedonic Home Value Index showed house and unit prices in Canberra experienced increases of 0.3 per cent and 0.2 per cent respectively in March, bringing the median price for units to $431,026 and houses to $675,582.

For the quarter, overall property prices fell .2 per cent but over the year were up 2.9 per cent.

Houses were flat for the quarter but recorded a 3.7 per cent rise over the year, while units were down 0.7 per cent for the quarter but up 0.4 per cent for the year.

CoreLogic said trends across the March quarter showed that capital city home values were 0.9 per cent lower over the March quarter, but regional markets had tracked 1.1 per cent higher, and were now consistently outperforming the combined capitals.

CoreLogic head of research Tim Lawless said the stronger combined regional markets performance continued a trend that began to emerge in October last year, where regional housing markets showed an overall improvement in the pace of capital gains, while the combined capitals trend softened.

Six of the eight capital cities have recorded a fall in values over the first quarter of 2018, ranging from a 1.8 per cent drop in Sydney values to a 0.1 per cent fall in Darwin.

“The broad-based falls highlight that the softening trend in the Australian housing market is largely due to weaker conditions in Sydney, however, most other capitals are also recording subtle falls,” he said.

There was some good news for Canberra renters looking for houses to live in, however, with Domain reporting that median weekly house rents fell 1.9 per cent to $530 over the March quarter, the first quarterly drop since September 2014.

However, this followed a record high last quarter and over the year, median house rents recorded a 6 per cent year-on-year increase, the second highest annual growth of all capital cities.

There was no relief for unit renters, with weekly unit rents in Canberra increasing for the second consecutive quarter, reaching a median of $450 and reflecting a 4.7 per cent quarterly jump and an annual increase of 5.9 per cent.

The Domain March Rental Report said unit rents in Canberra achieved the highest gain of all capital cities over the quarter, and were now back on par with the city’s all-time high achieved in December 2011.

“Units are the biggest sector of Canberra’s rental market, and the drop in house rents over the March quarter may be a reflection of the type and quality of rental stock leased in Canberra during the first quarter of the year,” said Domain Data Scientist, Dr Nicola Powell.

“Despite booming development activity, Canberra’s annual house and unit rental price movements have been on the incline since 2015, suggesting weakened investor activity and increased demand in the region. It remains to be seen whether rates and land tax increases, coupled with changes in lending standards and serviceability, will further tighten Canberra’s rental market this year.”

Alex Ahkey, Principal of Peter Blackshaw Queanbeyan and Jerrabomberra, agreed with the above analysis, saying,

“Canberra is continuing to experience a very tight rental market with low vacancy rates. We’re seeing a lot of first home buyers entering the market which results in less investment stock available. This is creating a higher demand for rental properties and an increase of rents for both units and houses year on year. This is great news for investors who continue to see an increase in rental returns as a result of less stock on the market”

“At this stage, we haven’t seen any impact on the investor market due to the land tax and rate increase. However, we are having more conversations with our investor clients who are wanting to know how these increases will affect them in the future. An increase of taxes may impact the rental market as investors seek to recoup any additional expenses”, he said.

CoreLogic said rental yields for both houses and units in Canberra were above the national average, with houses at 4.3 per cent, up from the national figure of 3.5 per cent, while units netted a gross rental yield of 5.5 per cent, compared to the national average of 4.2 per cent.

The continuing evidence of the strength of Canberra’s property market, particularly the demand for houses to buy and rent, comes as the Government moved to the next stage of its housing strategy amid calls from the Greens for a minimum proportion of social housing to be maintained, and increased supplies of affordable rental housing in the ACT.

The Government has invited Expressions of Interest to deliver best practice and innovative planning and design projects across the Territory as part of the Demonstration Housing project.

Housing Minister Mick Gentleman said: “This project will provide an opportunity for architects, builders, residents and social housing providers to showcase innovative design and delivery of real-world examples that are not currently available in the ACT, including small houses, co-housing and carbon neutral buildings.”

Expressions of Interest for the first stage of Demonstration Housing close on Thursday 17 May 2018.

For more information visit http://www.planning.act.gov.au/topics/current_projects/demonstration-housing