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Apartment glut to dampen unit prices further

By Charlotte Harper - 12 July 2016 6

Grey clouds over apartments

The price of units in Canberra will drop 4 per cent in the next three years – representing a 12 per cent decline in real terms – after falling 4 per cent last financial year due to an oversupply, according to industry analyst and economic forecaster BIS Shrapnel.

“There is still a significant pipeline of apartment construction to come through and this will continue to have a dampening effect on the market,” says BIS Shrapnel senior manager and author of the company’s Residential Property Prospects, 2016 to 2019 report Angie Zigomanis.

Mr Zigomanis predicts the capital’s median house price will rise by 6 per cent over the three years to June 2019, reflecting a decline of 2 per cent in real terms.

His report estimates the median house price here has experienced a modest rise of 4 per cent over 2015/16 to $595,000 at June 2016. New dwelling activity in Canberra had been particularly strong in recent years, with apartment development being sustained at record levels.

The report estimates that there is an underlying oversupply in the Canberra market, although it says reported vacancy rate figures have recently been below the balanced rate of 3 per cent and the impact of cuts to Federal Government departments appears to be dissipating. The rise in net interstate migration outflows was now turning and there was likely to be a balance or potential net inflow in 2016/17.

“Moreover, net overseas migration inflows have increased since bottoming in 2013/14, largely due to the recovery in overseas student growth that has coincided with the lower Australian dollar,” Mr Zigomanis says.

“Canberra also has the highest incomes of the capital cities and affordability is not as strained as in the other cities.”

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6 Responses to
Apartment glut to dampen unit prices further
Sheepaddock 12:52 am 17 Jul 16

When i moved down there in 06 for a fresh start and to escape Sydney the rental market ended up being more offensive than where i had come from,, there was 80 applications per site and it had to be inspected during working hours during week days with no consideration for your job and unless you had a .gov.au ending you email you were well behind on the list from the start. Totally forget applying if you had to wear ppe for work or didn’t offer under the table extra p.w to the real estate. I ended up sharing accommodation for the entire 3 years i spent there till i moved back to where i had come from tail between my legs and very angry. Belconnen was dearer than Cronulla ,shocker and try to find a unit with a lock up garage anywhere.

devils_advocate 8:37 am 13 Jul 16

Probably assumes stable interest rate policy, stable public sector employment, static wage growth, static credit/lending conditions and reliable returns in other investment classes (i.e. sharemarket).
Changes to any or all of those assumptions would affect the outcome.

gooterz 7:51 pm 12 Jul 16

greenbamboo said :

Apartment rents up 8% year-on-year (according to SQM) and rental vacancy rate down to 1.1%… does not suggest an oversupply at all. Rents and prices have declined in the last few years but came down from an overheated peak – at one stage Canberra was more expensive than Sydney and every rental open house had crowds through it. Do we really want to go back to that? Bring on the supply I say.

A real oversupply would mean prices dipping below cost of production (which defined in economic terms includes normal profit) and developers cancelling projects/going bust – we are definitely not at that point yet.

Even in a great market 1.1% seems really low. Seems more like all rental properties.

Rotten_berry 7:10 pm 12 Jul 16

Apartment rents up 8% year-on-year (according to SQM) and rental vacancy rate down to 1.1%… does not suggest an oversupply at all. Rents and prices have declined in the last few years but came down from an overheated peak – at one stage Canberra was more expensive than Sydney and every rental open house had crowds through it. Do we really want to go back to that? Bring on the supply I say.

A real oversupply would mean prices dipping below cost of production (which defined in economic terms includes normal profit) and developers cancelling projects/going bust – we are definitely not at that point yet.

Leon 3:13 pm 12 Jul 16

Is there a connection between this post and Charlotte’s other post of the same day?
http://the-riotact.com/tuckwells-fund-new-anu-residences-possibly-on-bruce-hall-site/180664

bringontheevidence 2:46 pm 12 Jul 16

I would take the results of this report with a grain of salt. BIS Shrapnel are notoriously poor at predicting property market outcomes in Australia.

However even if the predictions turn out to be true, Canberra remains one of the best markets to be an investor. Rental yields for apartments are over 5 per cent and vacancy rates are low. It’s one of the few places where you can make good returns regardless of capital gains.

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