1 September 2021

It's still up, up and away for Canberra's soaring housing market

| Ian Bushnell
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Apartments and townhouses

Apartments and townhouses in Coombs. With few affordable standalone houses available, buyers are adjusting their expectations. Photo: Michelle Kroll.

Canberra house prices continued their upward march in August, leading the nation as stock dwindles due to a combination of the usual winter slowdown and the fallout from the COVID-19 pandemic.

The latest data from CoreLogic shows the median standalone house price is now heading towards $950,000 and closing in on Melbourne, after a 2.4 per cent rise that takes the overall increase so far this year to a whopping 20.6 per cent and 25.7 per cent over the past 12 months.

That’s less than July’s 3 per cent jump, but it may be due to a dwindling of supply and buyers moving into the much cheaper townhouse and unit market where prices increased another 1.3 per cent, sustaining the previous month’s growth.

Overall, Canberra home prices rose 2.2 per cent, just behind leader Hobart at 2.3 per cent.

READ ALSO Off-plan property up to $500,000 now stamp duty free for all owner-occupiers

Last weekend only 37 homes – 27 houses (reported), four townhouses and four units – sold, from a scheduled listing of 85, with 46 reported, for a still high clearance rate of 80.4 per cent, where Canberra auction sales have been hovering for some time.

Home prices August 2021

Note: The figures for Perth and WA have been temporarily withdrawn while divergence from other housing market measurements is being checked. Image: CoreLogic.

The median price was $877,500. A two-bedroom house in Euree Street, Reid, on a huge inner-city block of 1045 square metres, lead the pack, selling for $2,025,000. The weekend before, a Yarralumla property in Musgrave Street sold for more than $3 million.

All of the top 10 sold for $1 million or more and 20 sold before auction, showing demand remains super strong.

The hopeful release from lockdown in mid-September and the traditional spring selling season may lift listings out of the doldrums.

According to SQM Research, Canberra listings in August were down 36.5 per cent from last year, dropping from 3902 to 2478. In July, in the depths of winter, there were 3035 listings.

With few houses to choose from, buyers are adjusting their expectations and looking at the townhouse and unit market where there are more properties in their price range.

That is helping to boost those prices, with the median now at nearly $526,000, the third-highest in the nation behind Sydney and Melbourne.

The 1.3 per cent increase was just behind Sydney and Brisbane at 1.4 per cent, and meant unit and townhouse prices have picked up steam this year with an almost 8 per cent rise, compared to the 12-month increase of nearly 11 per cent.

READ ALSO Relaxed real estate rules a step in the right direction ahead of spring sales

With its high average incomes, Canberra is not experiencing the moderating of prices evident in the national figure of a 1.5 per cent rise in August, which is still contributing to the fastest annual pace of growth in housing values for 32 years.

CoreLogic research director Tim Lawless says the slowing growth rate probably has more to do with worsening affordability than ongoing lockdowns.

“Housing prices have risen almost 11 times faster than wages growth over the past year, creating a more significant barrier to entry for those who don’t yet own a home,” he said.

“Lockdowns are having a clear impact on consumer sentiment; however, to date, the restrictions have resulted in falling advertised listings and, to a lesser extent, fewer home sales, with less impact on price growth momentum.

“It’s likely the ongoing shortage of properties available for purchase is central to the upwards pressure on housing values.”

Capital city house prices continue to grow more strongly than units, although the gap appears to be narrowing, which Mr Lawless says could be another sign that affordability is becoming more challenging.

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HiddenDragon8:13 pm 05 Sep 21

Canberra is an artefact of a federation which is now a fragmented fiscal mess – whether it ends with the proverbial bang or a whimper, this boom cannot last.

Probably the one good thing that has come out of the pandemic is the amazing investment returns we have had on just about every asset class except fiat currency since March last year.

I would not be able to cope with lockdown at all save for having an expansive garden in the inner north for my kids and dogs to enjoy and watch the birds. The wealth effect from appreciating asset values is the single biggest factor in the road to economic recovery so it is good the government is getting this right as it is supporting hundreds of thousands of middle class families across Australia and creating a stable consumption base when we start shedding these unnecessary lockdowns and live normal lives like much of Europe and North America.

Pretty much sums up everything that is wrong with modern day Australia in a single comment. I’ve got my big block and rising wealth, everyone else, and everyone that comes after me can go and get stuffed.

Don’t own any assets? Don’t own a house yet? Wouldn’t want to be you!

This kind of attitude is taking us down the road of greater division, until one day we’ll be left with a totally broken, dysfunctional society like the US.

If you had read my comment carefully you’d realise that rising house prices is benefiting the entire population and not just home owners (which is two-thirds of the population; the majority).

The main channel of monetary policy is through the wealth effect – rising house prices stimulates the economy as people feel rich and therefore end up spending more at cafes, restaurants, accomodation, etc. this pays the wages of retail and hospitality workers who in term have the opportunity to save for their own home.

You’ll find that the majority of aspiring home-owners are young families and while budgets may be tight and sacrifices need to be made, home ownership is well within reach and it gets much easier later on as salaries increase and you can use the equity in your home to upsize to something better. I bought my first home at the age of 24 after working in 2 jobs. I never travelled overseas except for business. I started off with a small unit and over the next 20 years bought multiple houses across Australia. The next generation needs to lower their standards and rethink some of their expenses as home ownership is not some sort of pipe dream. I see apartments in Canberra selling under 300k and just don’t understand why a fully employed person can’t afford something like that in under 5 years.

I’m with arescarti42 on this one.
Rising wealth without productivity is a pipedream. It’s a Ponzi scheme and those are generally illegal except not so in housing.
All you’re doing is the passing-on of debt. All the while disenfranchising your children.
So Sam, that’s good?

I think you have no idea what is going on out there and have no idea of how utterly impossible it is for most young people to save for a deposit without help from their parents. do you have any idea of what rent and childcare costs for young families and how much money is left over after that? do you really think its a good idea for people with young families to go and work two or more jobs? Just wow. What a great vision for our future.

the rest of your comments about the wealth effect are just nonsense and a way of you justifying your own privelege.

agree – i think Sam Oak gives the game away when he talks about ‘unnessecary lockdowns’.

Roseau, yes it is good that the future generation is growing up in a world of lower unemployment and higher wages. It is a common misconception that sovereign debt is something that future generations need to pay off, the USA has lived with ever growing government debt since WWII. The government budget is not the same as that of a household. Households have limited lifespans and by the time I retire I will have no debt and moreover inheritance to pass on to the kids. I should sure hope the Aus government is still around in 200 years time when wages are doubled, population is tripled and the debt situation will look even worse than it does now. Call Australia a ponzi all you like but that is what growing populations and wealth and prosperity is always founded on.

@dolphin, I suggest you learn some basic economics before calling the wealth effect bogus. Here is is explained by the Reserve Bank of Aistralia: https://www.rba.gov.au/education/resources/explainers/the-transmission-of-monetary-policy.html
Perhaps you would suggest getting rid of central banks, the free market and turning over all asset ownership to the state? Mandate one house per family and all of government regulated size?

You live in a complete fantasy detached from reality.

Unemployment is not low, and underemployment is at record high levels. Wages increases are at record lows – wages haven’t increased in real terms for close to a decade. Full time employment is becoming a thing of the past, the ‘gig’ economy and the casualisation of the workforce is entrenching low paid, insecure work.

You’re mad if you think 30% rises in house prices are helping first home buyers scrape together an enormous deposit with interest rates at record low, and wages going nowhere. And the RBA has admitted that the wealth effect ceases to work when interest rates approach their lower bound, and households are already saturated with debt.

You’re pretending like interest rate policy is the only level governments have to stimulate the economy – it’s not. All you’re advocating for is entrenching a permanent underclass of people with no secure employment, housing, or hope for their future.

Capital Retro4:16 pm 06 Sep 21

Interest rate policy is that of the Reserve Bank which is about to be called the Reverse Bank when they reduce interest rates below zero and continue to print money.

Your understanding of what raises living standards is woefully misguided Sam.

How do you reconcile your comment that “rising house prices is benefiting the entire population” with the recent UNSW cities futures research center report “Housing: Taming the Elephant in the Economy” written by a Professor of Applied Economics who had this to say…

“A system that raises housing costs for all Australians, that raises instability and lowers productivity does not serve the nation well. And as for rising housing wealth, it is not
like the wealth created from effort and innovation, for that creates gains for all. Rather, it makes some Australians, the affluent and older, better off by making younger and poorer Australians, and also future buyers, worse off. “

Former RBA head Ian Macfarlane would appear to agree, as he is on the record saying that those who profit from rising house prices “are making themselves richer at the expense of their children.”

and you double down with… “Call Australia a ponzi all you like but that is what growing populations and wealth and prosperity is always founded on.”

Really mate?

Insidious, what raises living standards is free market principles not misguided socialism dressed up as equality. There needs to be an aspiration towards saving for a house that drives productivity and we have evidence from fallen communist regimes in Eastern Europe that equality in a socialist sense leads to laziness and erodes productivity. Why work hard when you are guaranteed to have similar wealth and assets as your neighbour by putting in the bare minimum of effort?

House prices are driven by market demand and capped by affordability. The fact that we are seeing prices continue to rise means that it is still quite affordable to most households. Your borrowing capacity is inexorably linked to your incomes which forms the nexus for house price growth. What we’ve seen recently is a devaluation in the AUD through the RBA’s frenetic money printing or quantitative easing to pay off jobkeeper and the disaster payments. Remember socialism and money for doing nothing? This is essentially what is happening. Money is being handed out to keep the lower class employed and those with jobs are footing the bill. Hence if we keep free market principles alive, asset prices must go up. And how does that benefit society? Oh I don’t know we are keeping hundreds of thousands employed while they sit at home in lockdown lining their pockets with Centrelink money. Now tell me if these individuals are also deserving of home ownership as well?

We are lucky in Canberra that we can afford big blocks of land instead of shoebox apartments like Sydney and Melbourne. Look abroad to Hong Kong, seoul and Singapore and you will not take for granted what we have here.

The main problem with that is your assumption that the current government policies at both federal and local levels towards housing represent anything like a free market.

In reality, the government’s are massively intervening in the market, almost wholly to the benefit of current owners and investors.

If you say you value free market principles then you would actually support the removal of the government structures that are continually propping up house prices to unsustainable levels.

“…the lower class …. we are keeping [them] employed …. if these…are deserving…”
Marie Antoinette says Hi Sam 🙂

Chewy, you’re not suggesting abolishing the disaster payments, rolling back jobkeeper and stopping the printing presses at the RBA? I’m a proponent of minimal government regulation but even I wouldn’t go that far! Because those are the single biggest factors driving house prices in Australia right now and across the world. Take one look at any modern capital city in the western world; Toronto, Vancouver, NY, LA, London, Auckland, Singapore, HK, Paris, etc and you will see complaints everywhere from the lower class that housing affordability is out of reach. Australia has one of the highest ownership percentages across the world and you’d be crazy to think we don’t have it good here!

“If you had read my comment carefully you’d realise that rising house prices is benefiting the entire population and not just home owners (which is two-thirds of the population; the majority).”

Needed a good laugh this morning – thanks.

Wealth and benefit created by nothing but an asset bubble will not have a good end. That is all that needs to be said by such a laughable sales pitch.

What do disaster payments or Jobkeeper (which doesn’t exist anymore) have to do with the government’s policies on housing?

Australia also doesn’t have one of the highest ownership rates in the world, I don’t know where you’ve pulled that from, even though it’s pretty irrelevant to the points being made here.

I’ve also got to laugh at you thinking those factors are the main driving forces behind Australia’s property price booms. Yes, it’s all the poor people on welfare driving up the prices.

But it’s good to see that you believe in minimal government regulation in the area so you agree with me that the government should stop intervening in the market to continually prop up prices.

Unfortunate that a more neutral government position would see you lose money but it’s good to hear you’re not thinking solely of yourself.

Chewy, you’re not getting it are you? Let’s try a little bit of a thought experiment to help explain how jobkeeper, social benefits is linked to house prices. Say you had $100 saved up (acquired through hard work and sacrifice) and everyone else around you had $1. Now imagine the government hands out $50 to everyone except you. What do you think happens to the purchasing power of your $100? Oh but you still have double the amount of money as everyone else you cry! If you fail to understand this key analogy you will fail to understand why house prices have skyrocketed all around the world.
NZ has wound back a lot of the housing policies incentivising speculation and investors in the property market yet demand is still going through the roof and prices climbing ever higher. Australians will always try to find some scapegoat to excuse their laziness and unwillingness to save and make sacrifices. I’ve heard it was foreign investors, immigrants, etc. What could you possibly be blaming now? The government it seems!

Except a more apt analogy here would be that you had thousands of dollars saved up and the government gave out $5 which almost solely went on essentials. The difference it would make is small in the longer term, particularly when underlying economic conditions were extremely strained.

But you are right in that there are definitely people doing well financially out of the pandemic and they are what is driving the price increases along with constrained supply.

But this is not desirable, nor sustainable ling term. It hurts the Australian economy from a macro perspective to have people paying such high amounts as they are for unproductive housing assets. The investment money would be far better directed to other productive asset classes, which is why the government should normalise their policies away from propping up and preferentially supporting property.

“NZ has wound back a lot of the housing policies incentivising speculation and investors in the property market yet demand is still going through the roof and prices climbing ever higher.”

So if you think those government policies don’t actually do anything, you’d be happy to see them removed. I agree.

I always laugh when others describe housing assets as unproductive. I can’t think of anything more productive than providing a roof over someone’s head. I don’t think removing some of the tax policies relating to housing will improve the situation. Negative gearing and capital gains discount work to encourage housing investment so that renters pay lower rent. Remove it and see what happens to the rental supply here in Canberra. You can count on rents doubling and many poor families driven into homelessness.

And I laugh when property spruikers try to redefine what a productive asset is to suit their own self interests. Talking through your own pocket doesn’t change the reality that promoting more capital being locked up in unproductive housing
lowers overall economic growth over time.

As for the second half of your comment, that must be some strong Kool-Aid you’re drinking.

On one hand you think these policies don’t really do anything and on the other, you now claim that they increase housing investment to reduce rents (which is hilarious).

In reality, they increase rents from the exact cause you’ve identified. Increased housing investment driving increased property prices and thus increased upwards pressure on rents.

Without that demand, prices would be cheaper and home ownership rates would increase from renters becoming owners. The impact on rents would be minimal.

Subsidies distort investments in capital markets away from efficient capital allocations. Sam Oak appears to agree such distortions exist in housing. Those who benefit most from such distortions will be most in favour of them. This is otherwise known as rent-seeking.

sorry to burst your bubble sam, but I’m actually a have an economics degree, work as an economist and understand monetary policy pretty well.

For the record i didn’t call the wealth effect bogus – I said that your comments about the wealth effect were nonsense. I was particularly refering to your bizarre belief that all these folk with their higher home prices spending their money in cafes enables these hospitality workers to save for a house deposit. Ever seen what someone in hospitality or retail earns and how insecure their work generally is? Without help from parents or inheritances most people in these jobs will struggle to get enough together for even the most basic deposit.

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