Canberra property prices gain traction in June in surprise result

Canberra property values took a hit in July when a long-speculated slip in prices finally translated.

CoreLogic’s latest Hedonic Home Value Index, released on August 1, shows values for Canberra real estate dropped by 1.1% in July, but it was not enough to put a dent in the national capital’s annual growth, which the report says is tracking at 12.1%.

The downswing is in line with the national trend, which saw housing values fall for the third consecutive month. Sydney and Melbourne have seen more prominent declines.

Houses in Canberra took a heavier hit over units, with a 1.4% drop in values in July compared to 0.2% for units. Annually, Canberra house prices have sustained 10.9% growth, while units and apartments have recorded an increase of 16.5% in values.

The median dwelling price is now $925,973.

McGrath Canberra Managing Director Craig Chapman said the data was evidence of a groundswell of market uncertainty with many buyers holding off making property decisions on the back of interest rate rises, which are predicted to continue for the rest of the year.

But he said investors were returning to the market, which was apparent in the stronger unit prices over houses.

The CoreLogic report also showed rent prices remained strong, with 9.4% growth in rents raised for houses in the past year and a 7.4% increase for units and apartments. The rental yield is now at 3.8%, slightly above the national average of 3.4%.

Craig said there was hesitation amongst buyers amid forecasts that inflation would peak at 7-8% in December, which may translate to interest rates of 6%.

It comes as the Reserve Bank of Australia this week increased interest rates for the fourth consecutive month, raising its cash rate target by half a percentage point.

“We have a lot more choice coming for buyers with our spring listing season; and supply and demand says they get more leverage when that happens,” he said.

“So, we get laser focussed on presentation, laser focussed on marketing, laser focussed on positioning our property’s value and look at the fundamentals of what we do, which is process driven. We can’t control the market, but we can control how we respond to it.”

CoreLogic Research Director Tim Lawless said unit values recorded smaller falls relative to house values in most capitals, including Canberra.

“This trend is most apparent across the three largest capitals as well as Canberra, where housing affordability challenges may be deflecting more demand towards the medium to high density sector,” he said.

“Additionally, firmer interest from investors should favour the unit market over houses where demand has historically been more concentrated.”

In acknowledging the downswing, Craig said Canberra was being buffered from the larger falls seen in bigger capital cities like Sydney and Melbourne because of its unique position and stable public sector employment.

“Those that are serious about selling are listening to their advisers. My advice is: if you don’t need to sell your home now, don’t. I would wait for the market to stabilise, but that said, properties are still selling. People still need to buy a home, but we have less competition so less leverage.

“Equally, if sellers want to go to market, we’ve probably got to spend more on campaigns in terms of getting attention and once you’ve got the interest, you’ve got to be prepared to have discussions you may have not wanted to in terms of where they see value.

“The facts and figures are what they are, but the Canberra market is continuing to be resilient against the larger capital city markets like Sydney and Melbourne. We do buck the trend, we are a satellite city, we have very stable employment in government.”

Nationally, CoreLogic expects housing market conditions to worsen as interest rates surge higher for the rest of the year.

“The rate of growth in housing values was slowing well before interest rates started to rise, however, it’s abundantly clear markets have weakened quite sharply since the first rate rise on May 5,” Tim said.

“Although the housing market is only three months into a decline, the national Home Value Index shows that the rate of decline is comparable with the onset of the global financial crisis (GFC) in 2008, and the sharp downswing of the early 1980s.”