House prices: Why the home of federal Parliament is bucking the national trend
Australia’s property market is on the slide as the coronavirus weighs on buyers’ confidence, but one market has defied expectations and emerged as the “clear winner” amid the pandemic.
Canberra – home to federal Parliament, Lake Burley Griffin and the Floriade – experienced a 1.3 per cent uptick in house prices between the end of March and the end of July.
And the noticeable jump came as prices across the country fell by 1.4 per cent.
CoreLogic property analyst Eliza Owen said the ACT property market has largely been insulated from the devastating effects of the pandemic thus far, because the territory had successfully contained the virus.
Canberra has recorded no active coronavirus cases for almost a month and its restrictions on public gatherings and venues are among the most lenient in the country.
This is partly why the state has the lowest effective unemployment rate in the country (5.2 per cent).
Meanwhile, Ms Owen said elevated levels of apartment construction since 2012, when the ACT adopted its planning strategy to create a ‘compact and efficient city’, have also boosted house prices.
This is because detached houses now comprise a smaller proportion of the ACT property market, thus boosting competition and making them more valuable to prospective buyers. (Unit values have also gone up.)
But Ms Owen warned that weakness in the rental sector could affect property prices down the track.
“As property values continued to rise through July, rent values have declined half a per cent since the onset of the pandemic,” Ms Owen wrote in a blog post.
“While the dwelling market is currently a breakaway performer, there is a chance this market will experience a delayed downturn as the economic repercussions of Melbourne’s second lockdown become more broad based.”
The territory’s moratorium on rental evictions due to coronavirus-related financial hardship is expected to be lifted on October 22, nearly a month after JobKeeper and JobSeeker payments are rolled back.
And that could hurt landlords’ prospects to maintain rental income or find new tenants – with one-fifth of workers in the ACT’s renter-heavy arts and hospitality sectors losing jobs as a result of the pandemic.
The exodus of international students from Canberra could also affect its housing market, given overseas students comprise two-fifths of the Australian National University’s enrolments.
But record-low interest rates will push back against these downward pressures.
So much so that the Canberran pricing boom could play out for years to come, according to Charter Keck Cramer director of research and strategy Angie Zigomanis.
RBA governor Philip Lowe told the federal Parliament’s Standing Committee on Economics last week that interest rates would likely remain at their current levels for the next three years – and Mr Zigomanis said this would boost Canberrans’ borrowing power.
The economist also noted the territory’s cohort of public servants had relatively stable jobs, while the pandemic had increased demand for public-sector staff to implement emergency policies.
Roughly 100,600 public servants across all levels of government resided in the ACT in late 2019, according to ABS analysis of Australia’s public sector.
But this could give rise to an eventual downturn, Mr Zigomanis said.
“[The pricing boom] means there’s probably not going to be scope for bottom-feeding or bargain hunting that you might find in the other capitals right now,” Mr Zigomanis told The New Daily.
“But maybe three years from now when the economy starts picking up, chances are the federal government then starts working on trying to rein in levels of government debt and building surpluses back up, which means government jobs may not necessarily be as secure.”