21 November 2023

Canberra tipped to lead property price correction in 2024

| Ian Bushnell
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An expected rise in dwelling completion, particularly apartments and townhouses, will boost supply further and lead to an easing in prices. Photo: Geocon.

Canberra will suffer the highest property price falls in the country in what is being tipped to be a modest to moderate correction across most of the nation in 2024.

SQM Research in its annual update, Christopher’s Housing Boom and Bust Report 2024, is predicting price falls of between -4 per cent to -8 per cent under its base scenario and up to -10 per cent if there is an energy crisis that causes inflation to spike, prompting the Reserve Bank to jack up interest rates.

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The impact of interest rate increases to date, and the combination of slower anticipated federal government spending and an expected strong rise in dwelling completions in Canberra, is behind the forecast.

Canberra is one of the few cities recording accelerated housing supply, mainly units and townhouses.

A mitigating factor will be population growth, although Canberra has not received the level of migrants that Sydney and Melbourne have experienced.

The Federal Government has hinted at resetting immigration targets as it comes under increasing pressure for a pause so housing supply can catch up.

SQM Managing Director Louis Christopher said that while housing supply had increased in Canberra, housing affordability had fallen, mainly due to still high prices and rising interest rates impacting borrowing capacity and lending availability.

Mr Christopher said the federal government was likely to tighten spending this current financial year ahead of an election year.

“As we know, the Canberra economy is largely tied to the various federal government departments that are operating in town,” he said.

“I think that combined with some leading indicators, such as a big fall in auction clearance rates we’ve reported in Canberra in recent weeks, has led us to the view that it’s going to be a negative year.

“It’s not going to be a crash by any means, but it’s still going to be one we would classify as very likely to record housing price falls.”

house price scenarios

House prices in Canberra are closely linked to Federal Government decisions. Image: SQM Research.

Mr Christopher said interest rises would bite across the country, combining with an economic slowdown that has yet to be played out.

He said 2024 was not going to be a great selling year.

“I think what you’re going to see is those property owners not particularly inclined to sell definitely not sell next year,” he said. “We might see a little bit of a dry-up in listings initially.”

Mr Christopher said there would be a rise in distressed listings, but he did not expect panic selling in Canberra.

“It’s not going to be enough to overwhelm the market, hence the reason why we’re not expecting a crash,” he said.

Mr Christopher said Canberra had not experienced the same population pressures as Sydney or Melbourne driven by immigration and not the same sort of price rises this year.

He said the lion’s share of overseas arrivals had been going to Sydney, Melbourne and Brisbane.

“So there’s not been a massive population expansion, not in the past 12 months,” he said.

“Canberra’s growing – we’re well aware of that – but in more recent times, it hasn’t risen outrageously.”

Mr Christopher believed affordability would start to improve in the second half of 2024 when prices would have fallen and there was a reasonable chance of an interest rate cut towards the end of the year.

“That’s speculation, but we do believe that the rate of inflation is actually going to fall a little bit more quickly now than what the RBA is actually forecasting,” he said.

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That’s good news for buyers, but Mr Christopher warned they needed to be careful purchasing off-the-plan in a falling market.

SQM is also forecasting Canberra’s rents to fall between -2 and -6 per cent, again reflecting the improved housing supply, particularly in apartments and townhouses.

“So, unlike many of the other capitals, the housing shortage is not as severe per head of population,” he said.

Only Perth and Brisbane look set to avoid price falls.

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Ross of Canberra12:08 am 24 Nov 23

This time, Ian, I hope you’re right.

I have to agree with the sentiments on block size. Canberra used to be a city of few slummy areas. However this has changed with houses and townhouses built on tiny blocks and an oversupply of units.
Canberra has plenty of land and in the future with most knowledge workers working from home these high density slums will become even more of a chancre as people make lifestyle choices. This is already evident as public transport patronage has plummeted with no recovery in site.

Incidental Tourist10:00 am 23 Nov 23

This is a result of apartment glut in Canberra. There is a long list of bank’s “blacklisted” suburbs including CBDs in Sydney, Melbourne, Brisbane, Gold Coast full of high density apartment blocks where banks won’t lend over 70% . But after a decade+ these suburbs already left worst losses behind. Canberra was surprisingly immune so far from this black list. Inevitably this has to change given 80% infill policy. So such price drop is expected but it will mostly impact apartments and off-plan buyers most. Almost all off plan apartment buyers will have to pay more than their apartments will worth on day one. On top of it banks may demand up to 30% cash deposit to settle. Many of off-plan apartment buyers will have no choice but to loose deposit because they won’t be able to settle.

Andrew Cooke3:55 pm 22 Nov 23

27th of September this year in another article by the same author.

“Canberra house prices will pick up over the next nine months to rise by 4.4 per cent and then surge by nearly 10 per cent by the end of the 2025 financial year, according to the latest property report from KPMG”

It’s not journalism if you’re just repeating the press release from the “research centre”

devils_advocate3:35 pm 22 Nov 23

As of September this year the same author was citing a KPMG forecast of 10 per cent increase in Canberra

What as Barr demands that rentals lower their prices, despite no actual decrease in morgages.

Not with the levels of immigration we are seeing!

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