The surge in prices recorded during the August quarter continued in the three months ending September, with a further 2.87% lift in median house values to $538,000 according to Residex. The healthy showing in Canberra is among the best seen across the country, behind Hobart (4.71%) and Darwin (3.16%). The country’s capital also came in second behind Melbourne on a year-on-year basis with its 11.02% growth.
Units underperformed houses this time around, with just a 0.83% growth in median values over the September quarter to $417,000.
Peter Andrighetto, principal of Wright Dunn Real Estate in Ainslie, ACT, says the local market has shown interesting results of late, particularly within the auction sector. “The Canberra market has been quite buoyant,” he says. “We’ve had a lot of benchmark increases from the inner areas. Before you could buy in inner-north Canberra for the $500,000s; now the entry level is $550,000–650,000. That’s a big growth area.”
Andrighetto says that $650,000–700,000 in the inner-south will buy entry-level properties, while properties in the outer suburbs are selling in the $400,000s.
“Investors are slowly coming back because rents are pretty good. Average rents are sitting at $400-plus per week with tenant demand high and vacancy rates low. I expect returns to improve between November 2010 and February 2011 as a result of changes in public service appointments and the university calendar.”
While he also believes more properties will come onto the market within the next few months, he expects values to remain steady. “I think the market values we’re getting now will stay right through to the end of the year. However, if we get a higher than expected interest rate increase, that might slow things down. We’ve got a strong, stable employment base – government plus our own industry – we’ve got good rental returns, and investors coming to buy in Canberra can claim stamp duty off their tax because it’s part of a leasehold cost.”
Outlook
Like the other capital cities, Canberra is expected to feel the pain of worsening affordability brought on by rising interest rates and escalating house prices. Economic forecaster BIS Shrapnel expects annual growth in prices to slow down to around 3% pa over the next three years to a cumulative growth of 11% by June 2013.
“Federal government spending is expected to be more constrained as there will be moves to bring the budget back into surplus,” says BIS Shrapnel. “Over the next three years, interest rates are expected to edge upwards, to eventually peak at 9.1% by 2013.”
The forecaster says this will have a dampening effect on prices; however, improving economic growth nationally will continue to support them. Consequently, BIS Shrapnel says the median house price is expected to rise by 3% in 2010/11 to $540,000, with a lower presence of first homebuyers at the more affordable end of the market keeping overall turnover down.
“The RBA is expected to be more wary about inflationary pressures, raising the cash rate by 75 basis points over the year in an attempt to moderate economic growth. ”
