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The case of Canberra’s disappearing houses  

By Serina Bird Huang (aka Ms Frugal Ears) - 29 November 2016 14

Canberra Real Estate

One of my friends was trying to buy a house.  She started in June, and only just purchased one two weekends ago.  For months she complained: “there are just not enough houses on the market – I need somewhere by Christmas and don’t know what I can buy.”

Not enough houses in Canberra?  Prices going up and up and up? Is this the same city still reeling from massive public service job cuts?  Aren’t there always an abundance of properties on the market during spring?  What is happening?

As previously reported in The Riot-ACT, prices in the ACT are on the upwards trend.  And there is an increasing number of apartments being built and being put on the market.

I asked my long-standing real estate agent, Dennis Vlandis from LJ Hooker Belconnen, who confirmed there is indeed a shortage of quality housing being offered for sale in Canberra.  He assured me that houses on good sized blocks of land in well canopied streets would do well.  “Interest rates are low and most people are holding on to their houses rather than sell them,” he said. “Where else are people going to put their money?”  According to Dennis, the situation is slightly different with apartments and townhouses, but even with apartments and townhouses the oversupply issue is gradually being corrected.

According to Ron Bell, Chief Executive Officer of the Real Estate Institute of ACT (REIACT), for most of the peak spring selling season there were only 2,400 properties listed on Allhomes, compared with 4,000 the same time last year.  More recently, it has risen marginally to 2,800.  And most of the properties are apartments and townhouses.

The problem as Mr Bell sees it is a lack of ready to build land being put on the market by the ACT Government relative to demand. 

“The ACT is growing by 15,000 people a year, which creates a demand for 6,500 new residences each year,” he says. 

Mr Bell assesses the ACT Government’s strategy is to promote townhouses and apartments, despite the fact that many people – especially those with children – want a traditional backyard.  Purchasers in suburbs such as Moncrieff and Throsby desired having a backyard so much that they were willing to buy now and wait two years to get a decent road. Bell says that the shortage of houses on the market had pushed the medium price in Canberra up from the high $500,000s to almost $700,000 “in a matter of months”.

Terry Ryder from Hotspotting.com disagrees that Canberra is seeing meteoritic price rises.  Comparing four different reports, he concluded that prices in Canberra had grown moderately at between 4-5% in the last twelve months.  And there was still an oversupply of apartments, with at least one data source arguing that the medium price of apartments had actually fallen over the last twelve months.

And according to Mr Ryder, price rises, moderate or otherwise, are not being caused by interest rate rises.  “Interest rates are hugely overrated as an influence on the market,” he said.  “If you look at the figures for property price rises, at the moment only Sydney and Melbourne are really booming.”  Instead, price rises in particular locations are usually driven by the strength of the economy and the strength of infrastructure spending.  And supply.

Talking about supply, in this Canberra is in a unique situation because of how new releases are drip fed by the ACT Government.  As a result, Mr Ryder assesses that prices in Canberra for houses and land are relatively expensive. “It is a bit of a scandal,” said Mr Ryder when talking about how the ACT Government is not releasing enough land relative to demand.  “Tiny blocks of land are going for high prices.”

So is owning a house and land merely a dream for many Canberrans?  And assuming they can find a property on the market, are Canberrans taking on too much debt in pursuit of this lifestyle?  Would we say, see another, subprime meltdown with Canberrans struggling to pay for their mortgages?  According to MLC financial adviser and principal Michael Miller, purchase prices in Canberra involve big numbers.  Accordingly, many buyers – particularly first-time buyers – have large loans. 

“Anybody who has a large outstanding loan balance is exposed if interest rates go up, and especially so if their budget only includes the minimum repayments right now,” Mr Miller says. 

While he cannot say for certain if or when interest rates would go up, he advises mortgage holders to make additional payments to provide a buffer that could be drawn on in the future.

Serina Huang is a food writer, frugalista and loves property.  She has been investing in Canberra property for 15 years. Having just paid of her mortgage this year, she is now (somewhat crazily) looking to sell and perhaps rent for a while.  She is watching the Canberra real estate market carefully.

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14 Responses to
The case of Canberra’s disappearing houses  
Maryan 7:04 pm 23 Jan 17

“So, in terms of housing affordability in the ACT (which is sometimes raised here on RiotAct), now that ACT Labor/Greens has been re-elected, what’s going to change ???

Answer : Nothing. So, to those who aspire to home ownership here (especially if its to stand alone dwelling), and who voted ACT Labor/Greens, you have blown your foot off. Trouble is, the rest of us, including the elderly, disabled, retired, etc, are caught up in it too.

Well done ACT voters !!!

Spot on here!! Couldn’t agree more.

I actually heard someone say the other day, that they did not want the tram, but had voted for the current government !!
Work that one out . . . if you can !!

Then they say ACT is one of the most literate & well educated electorates in the country. God help the rest is all I can say !

devils_advocate 4:32 pm 15 Dec 16

Masquara said :

The ACT Government tried to force people to buy apartments, or houses on tiny blocks. People want houses with back yards. Who wants to bring up their children in a flat?

Well, 20m people in Singapore, for a start, then all the others in Hong Kong, Moscow, Mumbai, to name a few. Not everyone who chooses to make their home in Canberra is a fourth-generation local.

Also, the data quoted above suggests its own answer. If the median (not medium) dwelling price has increased modestly, and apartment prices have dropped overall – doesn’t that necessarily imply that detached dwelling prices have increased significantly? the effect would be greater if there were relatively more apartments changing hands compared to detached homes.

Masquara 5:04 pm 14 Dec 16

The ACT Government tried to force people to buy apartments, or houses on tiny blocks. People want houses with back yards. Who wants to bring up their children in a flat?

Chamberlains Law Fir 3:45 pm 14 Dec 16

Many of our clients are experiencing the pressures of an active market. If you love a property we always recommend:
1) Seeing your bank or broker about loan approval before you go to auction or make an offer;
2) Set a price that you’re happy to bid up to and stick to it no matter how much you love the property. To ensure you don’t experience mortgage stress later;
3) Have the contract reviewed by an experience conveyancer or solicitor, before you make an offer or bid at auction; and
4) Enjoy the ride!

-Louise Morris Director | Advisory – Property & Construction

JC 4:34 pm 02 Dec 16

dungfungus said :

JC said :

rommeldog56 said :

JC said :

I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block.

Who is it who thinks that “everyone wants the house on a 1/4 acre block” ??? I’ve never seen that commented or said – but if it suits your argument/mindset, so be it.

There is just not enough stand alone blocks being released to come anywhere near the demand for them – there is almost no choice now.

And why wouldnt the ACT Labor/Greens Govt do that. They have just increased Annual Rates on units/townhouses by 20% this year and another 15% next year.

Its a good revenue raising business model.

The ACT Labor/Greens Govt is just manipulating the market – if they were a private company, I dare say that the ACCC would be all over them.

Then again, obviously the too well off ning nong ACT voters and ratepayers voted themselves higher and higher taxes by re electing ACT labor/Greens, so who really cares !!!

What is really limiting the supply of land is land banking by builders. One builder actually got in the poo for sitting on land recently. Indeed it is no secret I have built in the past 12 months and again the land I got I got from the builder and had a choice of about 12 blocks all ready to go. But tied to that particular builder or I could purchase the land off the builder at a substantial premium of course.

So reality is the land is there but mostly already tied up and sold to builders with very few available to purchase off the shelf.

One of the biggest “land bankers” is a entity called the LDA.

I am not sure who owns and controls them but I know they have mates in the government.

Matter of opinion really.

But as I easily proved by using my own example (which btw was not a LDA development BTW) if you want a new build house there is plenty of land available. It is just in the hands of builders who buy roughly 90% of all blocks released.

To me that is the real issue builders buying the land and sitting on it.

Out of intrest much the same in Googong too, so who do you blame for the ‘issues’ out there? No labor/green government is there?

But of course a state liberal government who happily takes donations from the ACT liberals who in turn happily take donations from NSW developers (who cannot donate to NSW parties) with no intrest in the ACT. Doesn’t pass the sniff test that one does it?

dungfungus 9:57 pm 01 Dec 16

JC said :

rommeldog56 said :

JC said :

I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block.

Who is it who thinks that “everyone wants the house on a 1/4 acre block” ??? I’ve never seen that commented or said – but if it suits your argument/mindset, so be it.

There is just not enough stand alone blocks being released to come anywhere near the demand for them – there is almost no choice now.

And why wouldnt the ACT Labor/Greens Govt do that. They have just increased Annual Rates on units/townhouses by 20% this year and another 15% next year.

Its a good revenue raising business model.

The ACT Labor/Greens Govt is just manipulating the market – if they were a private company, I dare say that the ACCC would be all over them.

Then again, obviously the too well off ning nong ACT voters and ratepayers voted themselves higher and higher taxes by re electing ACT labor/Greens, so who really cares !!!

What is really limiting the supply of land is land banking by builders. One builder actually got in the poo for sitting on land recently. Indeed it is no secret I have built in the past 12 months and again the land I got I got from the builder and had a choice of about 12 blocks all ready to go. But tied to that particular builder or I could purchase the land off the builder at a substantial premium of course.

So reality is the land is there but mostly already tied up and sold to builders with very few available to purchase off the shelf.

One of the biggest “land bankers” is a entity called the LDA.

I am not sure who owns and controls them but I know they have mates in the government.

ChrisinTurner 4:50 pm 01 Dec 16

Instead of more urban sprawl we need more dual-occupancies. What was wrong with the huge blocks in Reid being sub-divided as long as the second dwelling was not visible from the street, being a historic precinct. Now you can only do it if you are near shops and Reid has no shops!

JC 4:09 pm 30 Nov 16

rommeldog56 said :

JC said :

I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block.

Who is it who thinks that “everyone wants the house on a 1/4 acre block” ??? I’ve never seen that commented or said – but if it suits your argument/mindset, so be it.

There is just not enough stand alone blocks being released to come anywhere near the demand for them – there is almost no choice now.

And why wouldnt the ACT Labor/Greens Govt do that. They have just increased Annual Rates on units/townhouses by 20% this year and another 15% next year.

Its a good revenue raising business model.

The ACT Labor/Greens Govt is just manipulating the market – if they were a private company, I dare say that the ACCC would be all over them.

Then again, obviously the too well off ning nong ACT voters and ratepayers voted themselves higher and higher taxes by re electing ACT labor/Greens, so who really cares !!!

What is really limiting the supply of land is land banking by builders. One builder actually got in the poo for sitting on land recently. Indeed it is no secret I have built in the past 12 months and again the land I got I got from the builder and had a choice of about 12 blocks all ready to go. But tied to that particular builder or I could purchase the land off the builder at a substantial premium of course.

So reality is the land is there but mostly already tied up and sold to builders with very few available to purchase off the shelf.

KentFitch 3:57 pm 30 Nov 16

It is interesting looking at the requirements of those that the ACT is seeking to attract to Canberra. The Capital Metro business case offered this on page 54, quoting from the 2012 ACT Planning Strategy:

“It is particularly important to attract young families to live in Canberra, where they will spend and support new business and services. To entice these families from larger cities, we must offer good employment and good, affordable living. While the landscape setting and environmental quality of our city is a drawcard, the lack of vibrancy in our urban environment, the limited range in housing and the cost of living can be discouraging.”

So, what do such families want? Rather than guess, the Grattan Institute asked them:
http://grattan.edu.au/wp-content/uploads/2014/04/109_what_matters_most.pdf

From Figure 8, “Top 10 variables for young couples with children (18-44)”, the people the ACT Government’s policies apparently want to attract, are:

1) Number of bedrooms (by far the most important factor)
2) Safety for people and property
3) The number of living spaces
4) Near family and friends
5) Whether the house is detached
6) Has a garage
7) Has a big garden
8) The number of bathrooms
9) Near your work
10) Has air-conditioning

The many features not in the top 10 for this group are almost as interesting. They included:

– Near bus/tram/ferry stop
– Near a railway station
– Near the CBD
– Has secure parking
– Attractive natural environment
– Near general health services
– Age friendly design
– Little traffic congestion
– Near cafes and restaurants
– Near local shops
– Near shopping centre

– A neighbourhood design you find attractive
– Is in a particularly clean/unpolluted area
– Dwelling foundation type (stilts or slab)
– Near the beach
– Has a diverse mix of people in the neighbourhood

rommeldog56 1:25 pm 30 Nov 16

JC said :

I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block.

Who is it who thinks that “everyone wants the house on a 1/4 acre block” ??? I’ve never seen that commented or said – but if it suits your argument/mindset, so be it.

There is just not enough stand alone blocks being released to come anywhere near the demand for them – there is almost no choice now. And why wouldnt the ACT Labor/Greens Govt do that. They have just increased Annual Rates on units/townhouses by 20% this year and another 15% next year. Its a good revenue raising business model.

The ACT Labor/Greens Govt is just manipulating the market – if they were a private company, I dare say that the ACCC would be all over them.

Then again, obviously the too well off ning nong ACT voters and ratepayers voted themselves higher and higher taxes by re electing ACT labor/Greens, so who really cares !!!

chewy14 12:44 pm 30 Nov 16

JC said :

bringontheevidence said :

If there was truly a ‘big’ lack of supply that could be addressed by new land releases then prices in outlying suburbs like those south of Tuggeranong and in West Belconnen would be through the roof, but they aren’t.

The big price rises have been mostly confined to the leafy established suburbs close to the city, and they’ve mainly been driven by recent falls in interest rates making repayments cheaper.

Continuing to blame a shift towards townhouses and apartments for prices rises is a complete fallacy, as without the massive increase in high density developments all of those buyers/renters would be competing with ‘families’ to buy detached housing, driving prices up even further. Even if there were more greenfield land releases happening.

Indeed. I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block. 20 years ago maybe but this day and age many including those with family’s would rather more inner living even if it means living in an apartment.

Well the continued oversupply of medium and high density dwellings would suggest that a very large proportion of the market still desire detached housing even if the government is only releasing far smaller blocks than it used to. There is a much reduced choice for a lot of families in what is available, so they take what they can get.
But it is interesting that large increases in price have occurred in the Inner North and Gungahlin over the last couple of years. Something about a new tram project I believe, isn’t that wonderful for those owners.

JC 12:39 am 30 Nov 16

bringontheevidence said :

If there was truly a ‘big’ lack of supply that could be addressed by new land releases then prices in outlying suburbs like those south of Tuggeranong and in West Belconnen would be through the roof, but they aren’t.

The big price rises have been mostly confined to the leafy established suburbs close to the city, and they’ve mainly been driven by recent falls in interest rates making repayments cheaper.

Continuing to blame a shift towards townhouses and apartments for prices rises is a complete fallacy, as without the massive increase in high density developments all of those buyers/renters would be competing with ‘families’ to buy detached housing, driving prices up even further. Even if there were more greenfield land releases happening.

Indeed. I am still shocked in 2016 that some seem to think everyone wants the house on a 1/4 acre block. 20 years ago maybe but this day and age many including those with family’s would rather more inner living even if it means living in an apartment.

bringontheevidence 1:56 pm 29 Nov 16

If there was truly a ‘big’ lack of supply that could be addressed by new land releases then prices in outlying suburbs like those south of Tuggeranong and in West Belconnen would be through the roof, but they aren’t.

The big price rises have been mostly confined to the leafy established suburbs close to the city, and they’ve mainly been driven by recent falls in interest rates making repayments cheaper.

Continuing to blame a shift towards townhouses and apartments for prices rises is a complete fallacy, as without the massive increase in high density developments all of those buyers/renters would be competing with ‘families’ to buy detached housing, driving prices up even further. Even if there were more greenfield land releases happening.

rommeldog56 1:44 pm 29 Nov 16

Issues from the OP :

1) ” The problem as Mr Bell sees it is a lack of ready to build land being put on the market by the ACT Government relative to demand. “The ACT is growing by 15,000 people a year, which creates a demand for 6,500 new residences each year, he said.” He assessed the ACT Government’s strategy was to promote townhouses and apartments, despite the fact that many people – especially those with children – wanted a traditional backyard.”

2) ” Talking about supply, in this Canberra is in a unique situation because of how new releases are drip fed by the ACT Government. “It is a bit of a scandal,” said Mr Ryder when talking about how the ACT Government is not releasing enough land relative to demand. “Tiny blocks of land are going for high prices.”

So, in terms of housing affordability in the ACT (which is sometimes raised here on RiotAct), now that ACT Labor/Greens has been re-elected, what’s going to change ???

Answer : Nothing. So, to those who aspire to home ownership here (especially if its to stand alone dwelling), and who voted ACT Labor/Greens, you have blown your foot off. Trouble is, the rest of us, including the elderly, disabled, retired, etc, are caught up in it too. Well done ACT voters !!!

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