Barr points finger at low rates as house prices gain almost 30 per cent in a year

Ian Bushnell 1 November 2021 31
35 Roebuck Street, Red Hill

Prestige sale: 35 Roebuck Street Red Hill went for $2.7 million at the weekend, the kind of sale Chief Minister Andrew Barr says is driving the headline housing growth figures. Photo: Peter Blackshaw Manuka.

Chief Minister Andrew Barr has rejected claims that government policies are driving up house prices in Canberra as new data shows both standalone properties and townhouses and units adding almost another 2 per cent last month.

Houses have appreciated by nearly 30 per cent over the past 12 months, with 25 per cent added in 2021 alone, according to CoreLogic.

But that growth rate has slipped slightly from the 2.2 per cent of August, while units and townhouses have gathered steam as budget-stretched buyers look elsewhere.

The Canberra Liberals continue to hammer the Labor-Greens commitment to 70 per cent of new housing being infill development, saying it has contributed to a lack of land supply for detached housing.

“The demand is for houses, and the Labor-Greens Government has been underdelivering and restricting the supply of land for detached houses for years,” Canberra Liberals planning spokesperson Peter Cain said.


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But Mr Barr said the housing boom was not limited to Canberra and was mainly due to ultra-low interest rates and tax settings that favour property.

“It’s a national and global phenomenon, and in fact, Australia’s house prices are the lower end of the OECD,” Mr Barr said.

Mr Barr said it was an asset price bubble fuelled by low-interest rates because “it’s never been cheaper to borrow in the history of Australia”.

Dwelling price data

CoreLogic Home Value Index Tables. Image: CoreLogic.

He said the main price rises were in the established market, especially prestige properties, not necessarily new areas and “they ain’t making any more Forrests or Yarralumlas anymore”.

“Canberra has the biggest houses in Australia, and some of the biggest houses in the world and they are amongst the best fitted out,” Mr Barr said.

“We’ve seen in the last two years hundreds of millions of dollars being poured into home renovations that have increased the value of individual properties.”

Mr Barr rejected claims that the government was not releasing enough land.

“We’ve got 185,000 properties in the city and the new land release each year is 2 per cent of the total market, so it’s established houses that drive the headline figures,” he said.

Mr Barr said demand could not be blamed for the ACT boom because the fall-off in international migration over the past two years had contributed to the rate of ACT population growth plummeting.

“The usual suspects are the government doesn’t release enough land, and it must be migrants. Well, neither of those things are true,” he said.

OECD house prices

This graph of OECD house prices provides some context for the Australian situation. Nominal house prices / Rent price, 2015=100, Q3 2021 or latest available.

Mr Barr warned that any fall in house prices could find many people who had borrowed for big mortgages in negative equity.

The Reserve Bank meets today (2 November) amid speculation that interest rates are on the rise as inflation picks up, but Mr Barr said it would probably hold the line for a time as it has other issues to consider, such as employment.

The median price for houses is heading closer to the million-dollar mark at $985,000, higher than Melbourne, while the median unit price is nearing $550,000.

In the last quarter, houses have surged 6.4 per cent and units not far behind at 5.2 per cent.


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The lack of listings for established houses has contributed to high prices, but more properties are finally coming on to the market with a large number of auctions back on site at the weekend.

Eighty-four properties were listed, with 71 reported and 62 sold for a clearance rate of 87 per cent and median price of $1,000,300.

The top price was for a Red Hill home sold by Peter Blackshaw Manuka for $2.7 million, followed by an Angas Street, Ainslie property ripe for redevelopment that brought $2.17 million.

CoreLogic says the key to continuing market growth will be when interest rates go up, and the Commonwealth Bank and Westpac have already increased their fixed home loan rates.

The other issue is tightening loan rules with APRA’s 50 basis point lift in the serviceability buffer coming into effect this month.


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31 Responses to Barr points finger at low rates as house prices gain almost 30 per cent in a year
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jorie1 jorie1 11:15 am 03 Nov 21

The problem is Barr is building far too many small units (not suitable for families), and there is not enough stand alone housing (houses and townhouses).

    bj_ACT bj_ACT 1:02 pm 03 Nov 21

    Yep our Units are the smallest in Australia and smaller than European countries. We need 120sqm apartments if we want older people to downsize.

    https://www.canberratimes.com.au/story/6025850/canberra-is-home-to-the-smallest-apartments-in-the-country-according-to-commsec-report/

    JS9 JS9 1:12 pm 03 Nov 21

    Barr isn’t building anything lol!. They can certainly do something about releasing more land for houses in new estates, but ultimately with urban infill, bar a very strong interventionist approach (even by their standards) the market is going to deliver what maximises profits – which won’t necessarily align with what many would see as a more ideal mix.

    The point bj makes is valid – but it is not only just about people downsizing either. Plenty of people quite like some of the advantages of townhouse/apartment living even when they have families – but the trend to super small units isn’t necessarily well aligned with giving genuine choice.

    We need larger apartments at the 1/2 bedroom level, but more importantly we need more bigger apartments (3/4 bedroom). There are some good ones in older stock, but a lot less in newer buildings being built.

    No surprise of course in any of that, but urban infill needs to be a genuine part of how we can house more people in this city (whether we should be seeing population increases driven by migration at the levels it was pre-covid is a valid question, but a separate issue). Urban sprawl forever in a day is not a sustainable model, and we do have plenty of appropriate and good opportunities for infill (even in those areas where the loudmouth NIMBY crowd will suggest ‘find somewhere else’). But it needs to be done well, and considered thoughtfully – and that’s the bit that isn’t necessarily happening well.

    Amanda Kiley Amanda Kiley 1:12 pm 03 Nov 21

    Barr wants everyone to live in apartments and forgo cars for public transport, he doesn’t live in the real world.

HiddenDragon HiddenDragon 8:54 pm 02 Nov 21

“The usual suspects are the government doesn’t release enough land, and it must be migrants. Well, neither of those things are true,” he said.

Yes, it’s a complete coincidence that some of the loudest and most relentlessly persistent defenders of “Big Australia” are directly or indirectly connected to the many-headed Hydra which is the Australian property sector.

bj_ACT bj_ACT 7:00 pm 02 Nov 21

The ACT government hasn’t got planning right for years.

Surely there’s scope for medium and high density dwellings around the town centres, but most importantly ‘with’ corresponding employment and entertainment facilities.

The focus on employment, infrastructure and facilities into Civic and the inner north has been great for the lucky residents like Barr and Rattenbury but not so good for the residents of Tuggeranong, Molonglo and West Belconnen.

Replacing Woden’s offices, green space and sporting/leisure facilities with Units is the epitome of poor long term urban planning.

Sam Oak Sam Oak 11:11 am 02 Nov 21

Why does the media always paint rising house prices as a disaster? Whatever happened to unbiased journalism? Ironically it was the only thing that saved us during lock down by encouraging home owners (two-thirds majority of the population) to spend money in the economy through the wealth effect as well as keeping the construction industry ticking over.

Even more ironically the only thing apart from petrol driving inflation at the moment is the cost of new homes. So those hoping that increased interest rates would do anything need to understand what would given the RBA ideas about raising the cash rate in the first place (i.e. inflation). Even the slightest fall in house prices and we’d be back in a deflationary environment and the RBA would have to fire up the printing press once again.

The amount of left wing commentators complaining and whining over the last few days is laughable and won’t stop complaining until a cleaner on minimum salary is able to afford in Yarralumla. And by the way it’s not land prices that have gone up by the cost of building a house in Canberra that is so exorbitantly high. I’ve seen McMansions out in the sticks of Gunghalin go for more than a barren patch of land in Yarralumla and that’s because it’s slowing creeping up to cost close to $1m just to build a decent quality family-sized home these days.

    chewy14 chewy14 11:45 am 02 Nov 21

    Housing costs are not included in CPI calculations so I don’t know why you think they are driving inflation. The fact that they are excluded actually hurts lower income people by not having the true increases in costs of living counted properly.

    And the commentary also has very little to do with “left wing” journalism, excessive house price increases are often a very bad thing for the economy as a whole when a large amount of investment dollars are sunk into an unproductive asset class when that money would be significantly better used in productive investments. Which is exactly what is occurring now.

    This is why the government should stop giving such preferentially taxation and policy treatment to housing investment that only exacerbates the issue. House prices need to normalise because they are currently limiting our wider economic growth potential.

    Sam Oak Sam Oak 1:13 pm 02 Nov 21

    Here we go with this “unproductive asset” rhetoric again. Providing a roof over a family’s head is every bit as productive as road infrastructure, schools, hospitals or the light rail. I’d like to hear what your idea of a productive asset is to invest in? Bitcoin? So if property is not in your portfolio, what are you proposing Australian’s spend money on? I’m sure it’d go straight to the pokies or “productive” luxury cars.

    Shares are taxed exactly the same as property. You are able to deduct net losses from your income and if you hold shares for over a year the 50% CGT discount also applies. I have a large share portfolio as well as property. But you need balance. Problem with shares is you can’t leverage or can only do so to a limited extent. The problem is not with the way property is taxed but the lending criteria for other forms of investment such as starting a business. I’m sure if you could borrow $1million at 2% p.a. to start a business more people would take up that option. But that’s up to banks and market forces. The market sees housing as safer (i.e. safe a houses) so no lender in their right mind would ever lend that much. It’s not that if you tax property more stringently the capital will go to business or be redirected elsewhere in the economy. Guess where it will go? Offshore to another jurisdiction that taxes property more favorably.

    Take property out of the mix and you’ve taken away one of the only ways ordinary Australians who work hard can save for their retirement. Compulsory superannuation is completely inadequate. We’d be a welfare state completely dependent on government pensions if couples didn’t have their PPOR to lean on in retirement.

    tuggeranongist tuggeranongist 2:43 pm 02 Nov 21

    I’m not sure why you think housing affordability is a “left wing” issue. Locking younger generations out of home ownership will be ruinous for conservative parties.

    Dorfrom Dorfrom 3:42 pm 02 Nov 21

    It’s the “Flap you, got mine.” attitude. Happily pulling that ladder up behind them.

    Sam Oak Sam Oak 4:20 pm 02 Nov 21

    @tuggeranongist, it is a left wing issue. Broadly speaking there is no housing affordability issue in Australia and it is no harder to buy a house than 30 years ago. If you are on a median income, you should expect to afford a median priced dwelling. And no, not the average house but all dwellings such as apartments and units which comprise the majority of dwelling types on the capital cities.

    Young people have ridiculously high standards these days believing they should be able to buy a 4 bedroom house on a quarter acre block within 10kms of the CBD. The average wage earner should not be able to afford that because that is not the average dwelling out there. Those types of properties should be reserved to the top 10% of earners.

    Housing affordability is only a left wing issue as they care more about equality than the overall welfare of Australians. They’d rather live in a hovel if all their neighbours similarly lived in a slum than live in a one br 10+ year old apartment when all their friends and relatives are living in houses. Take a look around at other countries and you will see housing affordability by their definition is a pipe dream. Sometimes you just have to suck it up, work hard and make compromises on where you can afford to live.

    chewy14 chewy14 5:14 pm 02 Nov 21

    “Broadly speaking there is no housing affordability issue in Australia and it is no harder to buy a house than 30 years ago”

    Sam,
    If you truly believe this you are more detached from reality than I thought.

    On every metric it is significantly harder to buy a hous now compared to 30 years ago. For example as a multiple of wages, houses have increased enormously beyond what they were 30 years ago. People are spending far higher percentages of their income on housing.

    The rest of your comment just is typical youth bashing that isn’t based on any evidence. It’s the standard ignorance of those who don’t want to recognise the privilege they have been handed, not through hard work or intelligence but rather luck and deliberate government policy.

    phydeaux phydeaux 5:23 pm 02 Nov 21

    “ … it is no harder to buy a house than 30 years ago. If you are on a median income, you should expect to afford a median priced dwelling.”

    Completely false.

    Wilful ignorance?

    tuggeranongist tuggeranongist 6:24 pm 02 Nov 21

    You seem to be very angry at crude caricatures that you’ve invented in your head (young people who want luxury houses for nothing and left wingers who want us all live in slums). Maybe you could just be a bit less selfish and try to think in good faith about the challenges that first home buyers are obviously facing in the current market.

    JS9 JS9 9:26 am 03 Nov 21

    Oh to live in a delusional fantasy world where the construct in your mind is ‘I’ve got mine so it’s all good’…….

    You seriously can’t believe the dribble you post time and time again.

    JS9 JS9 9:30 am 03 Nov 21

    “Housing affordability is only a left wing issue as they care more about equality than the overall welfare of Australians.”

    This says it all really about your viewpoint. As long as the pie is as big as possible, and I’ve taken as much as I can, then I don’t give a crap about what anyone else gets….. In your model, why don’t we all live in slums and have one single rich person? Its probably the most efficient scenario which maximises ‘overall welfare’, but its hardly desirable if one gives any crap for any other person.

    chewy14 chewy14 5:01 pm 02 Nov 21

    Sam,
    It isn’t rhetoric, it’s a fact.

    Housing as an investment is an unproductive asset. It doesn’t produce anything, it can never increase economic productivity.

    “So if property is not in your portfolio, what are you proposing Australian’s spend money on?”

    Productive businesses that produce things and can grow.

    You can’t invest in your house to increase productivity, whereas a business can invest in new equipment or processes that allow productivity increases for example, which aids the economic growth of our country.

    And no housing is treated extremely generously from a taxation point of view which is exactly the opposite of what the government should be doing because funnelling investment into property adds little.

    And it’s truly ridiculous that you attempt to use the circular logic of high returns on property due to its preferential policy treatment as a reason why it should maintain that preferential treatment.

    If people weren’t wasting so much money on unproductive housing, they would have higher returns through shares and other investments and would need less money to retire.

    Housing costs are one of the causes of the welfare state, not a solution to it.

    assiduous assiduous 6:50 pm 02 Nov 21

    Where’s the land then Andrew Barr? What have interest rates got to do with the ACT government pricing of new blocks? ACT Labor has no credibility on this issue whatsoever, only denials, crocodile tears and virtue signaling. ACT Labor seems to be betting that there is no community conscience, just greed for higher house prices at any cost.

    kenbehrens kenbehrens 6:52 pm 02 Nov 21

    Sam, you are a guy with a property portfolio.
    For someone wanting to buy their first property, an average increase in prices of 25% in the last year, is soul destroying. When prices increase faster than your capacity to save, your hopes are dashed. We have a thirty something son living with us. Good savings, 2 part-time and 3 casual jobs. The casual jobs are all in the entertainment and hospitality industries. Tell me he shouldn’t be discouraged.
    As for two thirds of people doing renovations and keeping the construction industry going during lockdown, what rubbish. The construction industry has also been locked down.

    JS9 JS9 1:16 pm 03 Nov 21

    We all know that kenbehren, but we also all know that the poster in question doesn’t care beyond their limited viewpoint of ‘I’ve got my piece of the pie, stuff everyone else’….

    A fundamental change in the view of the role of housing is needed in this country – a pivot away from view dominated by a boisterous lobby that lives off housing being ‘the one and only way to build wealth’ towards a more balanced view where housings primary purpose is reiterated as shelter would be a good start.

    But that would need serious reform to realign policy settings to deliver that framing – and when just as many pollies are as far into chomping away on the pie as this local example is, the chances of genuine, well thought out reform to deliver that are between zero and buckleys.

bj_ACT bj_ACT 10:00 am 02 Nov 21

Barr loves to twist the data and twist his wording to suit his narrative.

‘2% of the dwelling market in new land release’.

The real story is he’s talking ‘dwellings NOT land release’.

The release is mostly small 1 and 2 bedroom units and once again he’s releasing the least amount of square meter land release possible.

People don’t expect 5 new outer suburbs a year like the old days, but the current land release plan isn’t working to help housing affordability and it’s certainly not leading to a better planned city.

    jwinston jwinston 10:31 am 02 Nov 21

    I checked out Ginninderry over the weekend and was disgusted when I saw the houses stacked on top of one another and the tower powerlines within spitting distance.

    How is this government allowed to place its constituents in these conditions?

    Capital Retro Capital Retro 11:07 am 02 Nov 21

    It is allowed because it can, being a 50% partner in this development.

    bj_ACT bj_ACT 5:16 pm 02 Nov 21

    Yep a private partner apparently walking away with over $100 million dollars to build new houses over the border when there’s plenty of developable land in Canberra. This ain’t good urban planning it’s simply a money grab.

Acton Acton 8:43 am 02 Nov 21

Barr says “they ain’t making any more Forrests or Yarralumlas anymore”. Why not? With good planning we could have new suburbs with, in time, shady tree lined streets, decent sized blocks with gardens and houses built to suit the size and orientation of those blocks. Outer suburbs do become prestige suburbs if they are well located, beautiful and in demand. But Barr is not interested in families, or gardens or tree canopies or birds or beauty. It is all about forcing as many people as possible into the ugliest and smallest places possible to suit his policy of infill and densification. So he is doing everything possible to ensure there will be no more Yarralumlas or Forrests.

    chewy14 chewy14 11:50 am 02 Nov 21

    How exactly could you have such suburbs, where would they go? Where would people work? how would they travel? How would they access the same level of services and amenity as inner city areas?

    Canberra cannot continue to sprawl and the only people ever promoting that it can are those who are safely ensconced on their large inner city blocks and they are constantly trying to prevent anyone from having the same level of amenity that they have.

    It’s pure selfishness from those who don’t want others to have the same opportunities that they’ve benefited from.

    theguru theguru 12:44 pm 02 Nov 21

    Chewy, what a lot of rubbish. Not everyone works in the CBD. There are those that work in Gungahlin, Belconnen, Woden and Tuggeranong. It is perfectly acceptable that each of the regions has highly desirable suburbs, and not just the inner north/south ones.

    Every suburban region could offer the same amenities, but strangely enough the government doesn’t seem inclined to provide those amenities to the newer suburbs until the community starts kicking and screaming.

    As for the urban sprawl, you cant make more land in the established suburbs, so if buyers want housing, then you need to develop new greenfield sites. Eliminating the suburban sprawl simply means forcing buyers into apartments, and as we’ve seen, buyers in Australia have heavily favoured houses over apartments during the Covid property boom. Covid has shown that small apartments are suitable for sleeping but not living in full-time as has been the case for extended periods over the past 18 months.

    And as for your comment on selfishness, I own and live in the inner north. I am not denying you the right to have what I have, but unless I choose to sell, you cant have mine, and there are no vacant blocks next door either. I’ve been in my current home for 25 years, one next door neighbour has been there for 21 years and the other next door neighbour has been there over 30 years. Are we selfish? No! But for you to have what we have, we must move. That means you would need to buy us out, and you’d only get us moving if you bought on OUR terms, not yours. You can’t accuse someone of selfishness simply because they have what you covet and wont give it up for you.

    TimboinOz TimboinOz 1:56 pm 02 Nov 21

    We’ve been living in our 14.9 Sq. AVJennings BV home for 40 years!

    It was a dump, when we bought it. Filthy oven and stove, dirty carpets, …. .

    I’d attended Senate C’tttee hearings about energy efficiency, due to the ‘oil-shock.’

    It runs ~due East-West~, and faces North, on the North side of the road!
    (? Less reflected heat from the tarmac!)
    We added more insulation as we could afford it – with subsidies from the Feds and ACT. There’s ~ R5 in the ceiling, insulated walls, and insulated floors – foam sheets under laminated flooring. Kept the 80/20 wool/nylon carpets in the L-DRoom.

    It isn’t that hard to pay attention to your potential costs, folks!

    All of these upgrades – to the house – went in before I got a B.Comm.Mgt.Sc from UC and joined the HIC/Medicare/MedibankPrivate in 1993/4. & you can thank me for not having to queue for your rebates. I could ‘count’ before that course. I was a Tutor in Info. Sys. in my 2nd semester.

    We added a long & deep, Nth-facing, clear-roofed timber deck, with 91% shade-cloth under it. ? two layers of 70% shade-cloth! Stitched together and held in place by those twist-lock things.

    We don’t bother anymore with taking the shade-cloth down for the cold half of the year! It’s a lot of work and at 70 my skeleton is more important than a few bucks worth of extra sunlight in Winter.

    ACTEW-AGL recently put their maximum number of 13 solar panels on the roof, and we had a 0% loan from the ACT gov’t for that. Now paid off.

    None of this is difficult folks. And it saves $$$$$$!

    chewy14 chewy14 5:24 pm 02 Nov 21

    The Guru,
    You could not be more wrong if you think that every suburb or region has the same amenities. You would need to ignore reality to think that is true.

    “As for the urban sprawl, you cant make more land in the established suburbs, so if buyers want housing, then you need to develop new greenfield sites.”

    No, you increase density through creating a mix of dwelling types in existing existing areas. It isn’t all just apartments and it shows a lack of thinking that you believe this.

    “And as for your comment on selfishness, I own and live in the inner north. I am not denying you the right to have what I have, but unless I choose to sell, you cant have mine, and there are no vacant blocks next door either.”

    Exactly my point and you even freely admit your selfishness and think it’s a positive.

    You reject the densification that would allow others to have the same level of amenity that you have but then still want to benefit financially from your stance.

    The NIMBY position of “I’m alright Jack, screw everyone else” is the standard position of those who oppose the urban infill policies of the government.

    Sam Oak Sam Oak 1:25 pm 02 Nov 21

    @chewy, you’ve just named about a dozen or so factors keeping house prices up that taxation won’t solve. The further out you go, there are no schools, healthcare, amenities. Sure the government can up our rates and just build dozens of hospitals. But where are the doctors and specialists going to come from? Why would they come out and live in Tuggeranong when those specialists earn enough to live on waterfront properties in Sydney Harbour? WFH is a good idea in principle until you realise your surgeon can’t WFH when you need open heart surgery.

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