Prices are down but will economic good news bring Canberra buyers back to the market?

Canberra’s housing market continued to languish during January, defying the mostly upward trend in the rest of the country.

The slight slip in prices repeated a theme that has been apparent for months now as buyers wait for better economic news and a sign that the Reserve Bank’s war on inflation has been won.

That sign came in spades this week with the December quarter inflation number down to 4.1 per cent, better than expected, and hopefully putting an end to more rate rises and paving the way for actual cuts later in the year.

The Federal Government’s revamped tax cuts package will also boost sentiment as it puts more money in people’s pockets, particularly in Canberra where there is a greater proportion of PAYG taxpayers.

The traditional return to Canberra for Australia Day and back to school will boost inspections and auction numbers, but it’s confidence that’s really been lacking.

The CoreLogic Home Value Index for January reported a marginal -0.2 per cent fall for all dwellings, the same for houses and a -0.3 decrease for units and townhouses after a flat finish to 2023.

Over the past three months, the figure for all dwellings barely moved at 0.2 per cent. House prices stayed in the black, but only just at 0.4 per cent while units and townhouses were down -0.6 per cent.

The median house value in January was $842,971, while units and townhouses recorded a median of $586,891.

Canberrans still face the second-highest prices overall after Sydney.

While interest rates, affordability and cost of living pressures are keeping some potential buyers at bay, those in the market are enjoying greater choice.

More than 100 properties are listed for auction on Saturday after the holiday lull.

Nationally, there was a 0.4 per cent rise, continuing the upswing for a 12th straight month but at a much slower pace now. Among the other capitals, Melbourne and Hobart also had negative results but the rest experienced increases, especially in Perth which is in the middle of a boom.

CoreLogic says that detached housing values rose by half a per cent over the month across the combined capitals, adding the equivalent of around $4,800 to the median house value while units increased a smaller 0.1 per cent, equivalent to a $900 lift.

Research Director Tim Lawless said that since the start of the upswing, capital city house values had surged 11.0 per cent higher while unit values are up 6.9 per cent.

“It seems that most Australians are willing to pay a higher premium than ever for a detached home,” Mr Lawless said.

He said demand had been buoyed by high migration but also tight rental markets that have convinced renters to transition towards home ownership if they could afford to do so.

In Canberra, international migration has not been as strong a factor as in the big capitals and rents have actually fallen.

Mr Lawless said lending policies could loosen during the year with inflation easing and the prospect of interest rate cuts in the second half of 2024 bringing more buyers to the market.

Head of Research Eliza Owen said improving consumer sentiment could also stimulate more interest in the market.

“High cost of living pressures and high interest rates have been the key factors holding sentiment close to recessionary lows,” she said.

“It’s likely the lower than forecast inflation outcome for the December quarter, alongside a growing expectation of rate cuts later this year will help to lift consumer attitudes. If that is the case, we should expect housing activity to follow suit later this year.”