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Canberra a safe bet in hot housing market in 2020, says report

Ian Bushnell 14 November 2019 18
Ivy in Woden

A year of growth lies ahead but a pipeline of new stock may keep a lid on prices. Photo: File.

Canberra home prices are set to climb in 2020, even if economic conditions deteriorate nationally, according to a new report released today.

In fact, under four scenarios explored by the Housing Boom and Bust Report for 2020, released by SQM Research, Canberra is the safest bet in the country.

While Sydney and Melbourne will boom under the best-case scenario with double-digit growth figures, if the economy heads south only Canberra looks likely to offer consistent improvement and stay in healthy positive territory.

The report sees Canberra in a growth range of 4-8 per cent next year if the RBA cuts rates by 0.25 per cent (to 0.5 per cent), the trade wars stabilise and APRA stays its hand. That prediction drops to 2-5 per cent if the regulator steps in to cool an overheated market, putting Canberra behind most capitals. But if trade talks collapse, the economy weakens, the RBA cuts the cash rate to zero by end of 2020 and starts printing money (quantitative easing, QE), Canberra comes into its own.

The other capitals slip back to zero or even go negative but Canberra remains a solid 4-7 per cent.

Report author Louis Christopher says 2020 is going to be a fairly good year for ACT property owners.

“Strong population growth rates, First Home Buyer concessions, lending rate cuts and a reasonably strong economy will help,” he says. “On the flip side, a fairly strong pipeline of new stock may keep a lid on things.”

He says that even if the national economy does have a bad year, the ACT market may well still do well as the Federal Government may aim to increase spending, once they get their budget surplus.

His pick of the suburbs is Belconnen, due to its tight rental market.

The report says that most of Australia’s capital cities will benefit from the interest rate cuts and loosening of credit restrictions to record dwelling price rises over 2020 with Sydney and Melbourne leading the charge.

The base case forecast is for dwelling prices to rise nationally between 7 and 11 per cent, which is a strong bounce back from the price falls recorded over 2018 and the first half of 2019.

Sydney and Melbourne will drive the rises. The forecast is for Sydney to rise 10-14 per cent and Melbourne 11-15 per cent. Other cities are also expected to record price rises.

The base case forecasts assume no changes in interest rates and, importantly, no intervention by APRA. The base case also assumes a recovering Australian economy that has responded to the rate cuts of 2019 and reduced international trade tensions, plus ongoing strong population growth rates.

“The Sydney and Melbourne housing markets have recorded a sharp turnaround in the second half of 2019 following on from the surprise result of the Federal Election, interest rate cuts, the loosening of credit restrictions and ongoing strong population growth rates,” Mr Christopher says.

“These factors are expected to drive the national housing market into 2020. In a close call, APRA is expected to not immediately intervene despite the strong price rises.”

But doubts remain about the sustainability of this new recovery.

“Sydney and Melbourne are rising from an overvalued point. Long term, our two largest housing markets look vulnerable and forever reliant on cheap credit,” he says.

“Housing debt, while falling compared to GDP over 2019, is still very high. Better value can definitely be found elsewhere such as Perth and Brisbane.”


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18 Responses to Canberra a safe bet in hot housing market in 2020, says report
Yaron Gal Yaron Gal 9:53 pm 18 Nov 19

By the end of the day if we buy well we won’t have a significant loss even in tough market. Units and houses are totally different asset classes, even if the report say ACT moving up, it means that some asset base on land value increase the average and the median and some inferior product under heavy supply will remain flat or will increase only poorly over one single property cycle .

When you buy Strata units with high cash flow risk, you must run proper risk management to validate equity risk and return. You will be surprise as many marketers and research reports along the history didn’t and haven’t nail it at all.

    Sam Dodimead Sam Dodimead 4:06 am 19 Nov 19

    That’s a sound approach Yaron. I’ve written a report on the ACT Economy and how it correlates with the property market and can share it with you if you are interested?

    Yaron Gal Yaron Gal 12:02 pm 19 Nov 19

    Sam Dodimead yes, thank you , I m interested. You can send to info@investinproperties.com.au or PM. Thank you again .

Breanna Nobbs Breanna Nobbs 2:32 pm 16 Nov 19

Sonja Nobbs I'ma make bank if I ever sell 😂

Karen Feng Karen Feng 6:39 pm 15 Nov 19

are you sure? I feel currently the market is a bit over saturated with units.

    Sam Dodimead Sam Dodimead 7:13 pm 15 Nov 19

    The central case in SQM’s Report was interest rates would not drop in 2020 however Canberra property prices, which combine units and houses would appreciate. If you separate these the result will likely show houses doing the heavy lifting.

    In my opinion multi-unit market is operating at extremes. On one end there are projects overpriced by $500 - $1,000, or offering equivalent incentives. At the other are some really well priced buying opportunities backed by high caliber developers.

David Cassar David Cassar 12:32 am 15 Nov 19

It's only ever bad news when prices of assets which are essential to modern life, such as a home, are increasing faster than the rate of inflation. And you only need high school maths to demonstrate that could never be sustained long term.

David Graham David Graham 10:49 pm 14 Nov 19

Never buy starta units, wake up

HiddenDragon HiddenDragon 8:45 pm 14 Nov 19

This is really quite grim news for people hoping to have a place they can call their own, particularly when incomes for most will grow (if at all) nowhere near as quickly as housing prices.

A national economic model so heavily reliant on endless real growth in housing prices cannot be sustainable in the longer term.

Col Strand Col Strand 6:58 pm 14 Nov 19

How many utes have you got??

Trace Hawker Trace Hawker 2:10 pm 14 Nov 19

So it makes it even more difficult for new home owners.

    Sam Dodimead Sam Dodimead 2:41 pm 14 Nov 19

    Hi Trace, the ACT Government has a scheme to help first home buyers into the market. Sites sold by the ACT Government often requires development of affordable housing to be sold to concessional first home buyers. The scheme was changed last year to help more first home buyers secure affordable properties.

    Trace Hawker Trace Hawker 2:53 pm 14 Nov 19

    Sam Dodimead sorry bro I'm old school. Green grass back yard and not spitting distance with the neighbor.

    Sam Dodimead Sam Dodimead 4:27 pm 14 Nov 19

    Hi Trace, I understand however it is unrealistic to believe this is the most effective way to help first home buyers own property. If someone is ‘old school’ and is fortunate to own a house like the one you have described, it’s unlikely they would elect to sell it significantly below market value to provide affordable housing. You may be surprised to hear the national price record for a residential property is held by an apartment. Buyers are starting to perceive a higher value on convenience and amenity over space.

Cary Elliot Johnson Cary Elliot Johnson 1:16 pm 14 Nov 19

Cool, that'll definitely help me pay my increased rates and utilities.

Veronika Sain Veronika Sain 12:33 pm 14 Nov 19

Based on an assumption that the economy won’t slow (which is happening), international trade wars don’t keep escalating and interest rates don’t rise.

"The base case forecasts assume no changes in interest rates and, importantly, no intervention by APRA. The base case also assumes a recovering Australian economy that has responded to the rate cuts of 2019 and reduced international trade tensions, plus ongoing strong population growth rates."

    Sam Dodimead Sam Dodimead 2:38 pm 14 Nov 19

    Hi Veronika, What do you believe will cause interest rates to rise in the next 12 months? SQM did model deteriorating trade relations between US and China and Canberra values remained strong.

    Sam Dodimead Sam Dodimead 7:12 pm 14 Nov 19

    SQM’s report didn’t state interest rates would increase, and when they modeled the other circumstances you’ve mentioned they determined property values would increase. If you’d like a copy of the repost DM me your email address and I’ll send it to you.

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