The property market in the Australian Capital Territory has not performed as well in 2019 as the area’s neighbouring zones, notably, the Yass Valley and Snowy Monaro regional council zones. A factor to note when comparing the property markets in these areas is that of sales volume. The ACT is a larger market than neighbouring LGAs. Sales by house and unit market segments for 2018-2019 register in the thousands, whereas surrounding council areas only experience sales in the hundreds per property type.
The median house sale price fell slightly more than the price of units during the period. Both houses and units experience strong rent price growth – between five and six percent. Lower purchase prices and higher rents pushed up property yields for both houses and units, with units increasing their profitability faster than houses.
The ACT buy-to-let sector became more profitable during 2019. Average house prices fell by 1.1 percent and unit sales prices fell by 0.28 percent, rent levels rose 5.16 percent for houses and 5.73 percent for units. Compare this to the equivalent data for Yass Valley where house prices rose by 14.1 percent, but the rent for houses only rose by 1.77 percent.
Demand for houses is greater for sale than for rental, while the unit market has more demand in the rental sector than in sales. Demand in both the sale and rental property markets in the ACT is lower than the national average.
Property sales for the period of 2018-2019 segmented by property type and size show the demand profile for Canberra. Units are more popular for those seeking one and two-bedroom properties, while family home buyers, with a need for three, four, or five-bedroom homes, prefer houses.
Three-bedroom properties sell in far greater numbers in ACT than any other type of home. The market for three-bedroom homes was double that for two-bedroom properties during the year. Three and four-bedroom houses sell in larger numbers in Canberra than any other property type or size.
A long-term view of the ACT property market shows that both sale and rental prices of houses have fallen in recent years. Forecasts expect both sectors to regain those losses over the next year.
While the demand for houses for rent continues to increase over the years, demand for houses for sale has fallen since 2017. HtAG don’t expect any recovery in house sale volumes in the next year. However, the rental sector will experience increasing demand based on forecast data.
Due to higher number of property sales than that of rentals, forecasts for the median price have higher confidence levels. The confidence cone for rentals widens considerably out to Q1 2021. Rents could lower to $520 per month or go as high as $630.
Price differences of houses by number of bedrooms should narrow over the next year. Four and five-bedroom properties are expected to fall in price, three-bedroom houses will remain at roughly the same price level, and the median price for two-bedroom houses are expected to increase. Bedroom-level forecasts are currently using a beta model source, so expect these forecasts to be revised once the model is fine-tuned by our data science team.
Charting price changes per year gives us the market cycle of house sales in ACT. In the graph below, the blue line crosses the zero level three times. This is worrying because market analysts classify three or more crossings to denote a risky market. However, dips into negative territory are rare. The 2013 dip barely touches the line, so some may argue this is not an actual crossing.
This year’s price change is very similar to levels seen in 2008, which was start of the financial crisis. So, we may be at the bottom of the dip – HtAG forecasts a recovery to one percent positive growth in 2020 and almost two percent in 2021.
A detailed heatmap by suburb shows that prices have only fallen in central localities. Capital growth in south Canberra and Woden have not been high enough to offset these declines. The Central area has much higher prices than the more buoyant suburban areas. The North, North-West, and far South of the ACT, which have seen greater gains in capital growth, have the lowest median prices.
Unit sales volumes have fallen significantly since 2017 and rental demand has risen consistently year on year. Sales volumes are expected to increase over the next year but median sales prices are forecasted to decline slightly. The confidence cone for the median price forecast is very wide, indicating that there isn’t much price certainty in the unit sales market.
Forecasts have higher confidence levels in the unit rental sector. Rents will rise from their current median level of $450 per month. By Q2 2021, median rents could have risen to $480 per month, or as high as $560.
The price difference between unit size is very wide, with three-bedroom units currently selling for a median price of $600,000, almost double the median sales price of one-bedroom units.
The market cycle of unit sales in ACT has a longer wavelength than the housing market. Price changes have only crossed the zero line once in the past 12 years. However, they are currently in negative territory and are expected to stay there for one more year. Price falls are particularly expected in the one-bedroom unit category.
Suburb price data shows that recent median price falls for unit sales have all occurred in the O’Connor, City, and Barton area. Falls have been heavy at 12.9 percent in O’Connor over the last year. The biggest median price gains for units were in the Forrest district at 9.38 percent. In Gungahlin, the median sales price for units rose by seven percent.
The ACT property market has had a bad year and it isn’t quite out of the woods yet. However, by Q2 2021, HtAG forecasts that prices will begin to recover. Indicators show that the forthcoming year is a good time to buy in Canberra, particularly for those who want to rent out investment property.
House prices are expected to recover quicker than those for units in the next year. However, sales volumes for units should increase faster than those for houses, due to oversupply in this market segment.
HtAG forecasts that Turner and Fraser will offer the best value increases for houses, while units in Watson will have the highest value increase in the ACT over the next year. If you plan to buy to let, O’Connor and Hawker represent the best deals because falling unit prices and rising rents offer the highest yields on investment. High yields on houses can be encountered in Amaroo and Bonner.