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Increasing house prices in Canberra?

By catey - 14 September 2010 37

House prices in Canberra have sky-rocketed over the last few years.

When working for the ACT government some years ago, I remember the discussion about the “live in Canberra” campaign and how to attract people here. One of the big selling points here has always been that housing was more affordable. So, now that’s gone. Obviously we all see benefits of living here but people taking that first step in a big interstate move need a hook and that was one of the good ones!

So, what are the factors in the price rise? Not just interstate investment. Definitely higher building prices is a factor, so what keeps the big project home players out of the market here? – someone was talking about that recently on RiotACT.

Maybe the ACT government’s approach to land releases is a factor – slowing supply? And this is a side issue, but the new blocks are small – big houses, small courtyards. Is this what families moving here escaping the bigger cities want? Is it what local families want? I lived a while in Wollongong, which has a similar sized population. When building a house there, there was a required “green envelope” area around the house ie the house could only take out a certain portion of the property with the rest to be landscaped, so double storey houses were a good option and then you could get cheap plants from the botanic gardens each year by taking your rates notice to show you were local (I think here its just a one-off supply of free plants after you first build, but could be wrong?). So, we were encouraged to have green areas around the house, not just tiny concreted entertaining areas on the side of your house!

I’d like to hear what the government’s thinking is on the rising price of housing in Canberra, as this obviously makes it harder both for locals to get their first home or move as their family situation changes, and for attracting people to live and work in Canberra. So, what is the Government’s approach to attracting people to Canberra now (presumably still a goal of the ACT Government?) and what are its plans for making housing more affordable for locals. (And by the way, the usual “affordable housing” (cheaper and even smaller) options they offer in the new developments don’t seem so affordable either!)

Any thoughts?

What’s Your opinion?


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37 Responses to
Increasing house prices in Canberra?
arescarti42 2:47 pm 14 Sep 10

The other point with negative gearing is that for most people with negatively geared investment properties, the only way they can actually come out ahead in their investment is if the capital value of the property rises so much that the capital gains when they sell it actually cover all the losses made in the interim.

That’s a fine strategy when house prices have been going up at the rate they have over the last decade. The reason that this has been able to occur is that people were willing to take on increasingly large mortgages, not because wages have been increasing greatly. People can only service the interest on so much debt, and once this maximum level of debt has been reached, prices wont be able to increase, and that negatively geared property probably wont look quite so appealing.

arescarti42 2:33 pm 14 Sep 10

Very Busy said :

rosscoact said :

for you young’uns or those with short term memory problems research what happened in the early eightys when negative gearing was removed for a while.

Could you save me the trouble of doing the research and just tell me?

He’s going to say that rents went through the roof because the incentive to invest in rental properties was removed. This is in fact, wrong.

If you actually bother to look at the ABS CPI deflated rents for the period 1985-1987, when negative gearing was removed, you’d notice that only Sydney and Perth experienced significant rental increases. In fact, rents in Adelaide and Brisbane fell, and rents in Melbourne remained flat. Negative gearing was removed nation wide, if it did indeed cause rents to increase, then you would expect to see rents increase in places other than Sydney and Perth.

pepmeup 2:14 pm 14 Sep 10

It all comes down to income, The average full time income in Canberra is about $74,000 and the national average is about $62,000. That is what makes the big difference. Look at what is happening in mining towns in Queensland and WA where house prices have also sky rocketed.

It does look like we are getting ready for another quick rise, two house came on the market in kaleen this week, 1 for offers over $685k and the other at offers over $690k, to me that seems very expensive for 4 bedroom houses on blocks that are not RZ2 zoned. I will be interested to see what the final prices are.

Very Busy 2:01 pm 14 Sep 10

rosscoact said :

for you young’uns or those with short term memory problems research what happened in the early eightys when negative gearing was removed for a while.

Could you save me the trouble of doing the research and just tell me?

rosscoact 1:30 pm 14 Sep 10

almost 20 years without a recession doesn’t hurt either

And for you young’uns or those with short term memory problems research what happened in the early eightys when negative gearing was removed for a while.

astrojax 12:57 pm 14 Sep 10

I’d like to hear what the government’s thinking is […]

wouldn’t we all!

shaneb said :

Of course, I meant to say the 1890’s..

yes, but you were thinking 1980’s when the constitution was being shafted… 🙂

bobbatty 12:49 pm 14 Sep 10

vg said :

“House prices in Canberra have sky-rocketed over the last few years”

Over the last ‘few’ years? Bullshit they have

Ha ha, best contribution I’ve seen vg. You are to be congratulated on a surprisingly accurate summation.

Rollersk8r 12:48 pm 14 Sep 10

There’s a decent article on this very topic (Victorian perspective) in today’s Age. It'[s nothing new but the two points worth noting are that we’ve used our increased prosperity to take on more and more debt (and compete for better houses) – and it’s investors and negative gearing that are locking young people out of the market.

Negative gearing is the sweetest tax dodge of them all, if you’re fortunate enough to have the money to invest. Which is why there would be rioting in the streets if any government tried to change it.

http://www.theage.com.au/opinion/society-and-culture/ownership-out-of-reach-20100913-1598d.html?autostart=1

shaneb 12:41 pm 14 Sep 10

Of course, I meant to say the 1890’s..

shaneb 12:40 pm 14 Sep 10

From my non-professional point of view the increases (beyond CPI) in the cost of housing seem to be caused primarily by increases in the price of land, especially in the non-prime locations where prices are strongly influenced by the price of new land being released by the ACT government at the fringes.

Why is new land in the ACT so expensive? Because in the 1980’s when the constitution was drafted the Commonwealth was given a head of power enabling it to make laws relating to corporations (and inadvertently – taxes on corporations). Fast forward to today and you have a huge fiscal imbalance between the federal and state governments, whereby the federal government collects and spends the majority of the ~$300 billion in taxes collected and the states do their best to provide the front line services that people actually care about with their share the remainder. Additional revenue streams needed to be found and property is it.

vg 11:29 am 14 Sep 10

“House prices in Canberra have sky-rocketed over the last few years”

Over the last ‘few’ years? Bullshit they have

arescarti42 11:16 am 14 Sep 10

“I’d like to hear what the government’s thinking is on the rising price of housing in Canberra”

The government is thinking “woo hoo! higher land values means more revenue generated from new land releases”.

“what are its plans for making housing more affordable for locals”

Present some piece of media propaganda every once in a while to make it look like they care, whilst doing everything they can to try and ensure that property values continue to rise.

Although house prices are expensive here, Canberra is still one of the most affordable capital cities in Australia simply because the average wages here are much higher than in other cities. See this graph.

As for why they are expensive (Australia wide, not just in Canberra), I believe it is primarily because of people’s increased willingness to take on massive amounts of debt, and the entrance of property speculators into the market.

A lot of people will tell you that it is a case of demand exceeding supply, but I don’t think this is true for most places. In Canberra for example, between 2001 and 2006, the population increased by 14,292 people, and the number of dwellings by 9,659. This means that for that period, a new dwelling was built for every 1.48 people moving to Canberra, despite the number of people per dwelling remaining steady at 2.6. That is to say, between 2001 and 2006, supply exceeded demand.

Perhaps unsurprisingly, the 2006 ABS Census reported that 1 in every 16 dwellings in Canberra were unoccupied.

DeadlySchnauzer 10:59 am 14 Sep 10

They just need to move a few public service departments to sydney or melbourne. That would be enough to send house prices crashing.

rosscoact 10:58 am 14 Sep 10

canberra has the highest mean income in Australia i.e. people can afford more, it’s simplly more affordable

supply was limited a couple of years ago but I think 6000 dwelling site were released in the last two years and 5000pa are promised for the next couple

wollongong is about half the size of canberra and has half the average income

Google is your friend. Try “act governmnet affordable housing” for instance or even go to the site http://www.actaffordablehousing.com.au

Queanbeyan – enough said

Holden Caulfield 10:20 am 14 Sep 10

Maybe they need to start talking about the “Capital gains”. 😉

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