Canberra house prices rise while unit prices plummet: Domain report

The latest Domain Group data offers a glimmer of hope for Canberra’s first home buyers – but only if they’re looking to buy a unit.

The Domain State of the Market Report, released on Thursday, shows house prices have risen to a new high, while unit prices have plummeted to an eight-year low.

Canberra’s median house price continued its steady rise over the June quarter to $723,299.

This is an increase of 3.9 per cent over the quarter and an annual increase of 8.9 per cent.

A 2.9 per cent dip in unit prices marked the sharpest decline since the 2004 quarter, according to Domain Group chief economist Andrew Wilson.

Unit prices have dropped 3.7 per cent year-on-year and the $403,128 median price is at its lowest value since the December 2009 quarter.

Canberra remained the third most expensive capital city housing market in the country behind Sydney and Melbourne, which had median house prices of $1,178,417 and $865,712, respectively.

• Related: Canberra rents continue to rise in autumn
• Related: Canberra’s median house price surpasses $700,000
• Related: Investors drive Canberra price growth

“There’s clear potential for growth – it’s a stronger economy, migration is picking up and those two drivers tend to go hand in hand,” Dr Wilson said.

“Units are going the other way, but I don’t think that will surprise anyone as we know there’s been significant development in Canberra units.”

Despite the oversupply of unit stock, Dr Wilson said the tight rental market, strong yields and a decline in building approvals indicated that the market would bounce back.

Domain Group data scientist Nicola Powell said the demand for townhouses and apartments was on the rise – 749 units sold in the June quarter, a 29.1 percent year-on-year increase.

“We have seen an increase in buyer activity, but units represented almost 80 per cent of construction approvals in 2016 and it really highlights why we’re seeing that negative price fall,” Dr Powell said.

Despite the oversupply of unit stock, Dr Wilson said the tight rental market, strong yields and a decline in building approvals indicated that the market would bounce back.

“Knowing that those prices are at long-term lows, there has to be an upside eventually,” Dr Wilson said.

“Prices will start to rise sooner rather than later, but certainly we’ve still got stock to come into the marketplace and that’s what’s keeping pressure on prices.”

Dr Powell said the other factor that could affect unit prices was an inevitable rise in interest rates.

Canberra house rental prices remained steady over the quarter with a median price of $500, a 6.4 per cent year-on-year increase.

Median unit rental prices dropped 2.3 per cent to $420 over the quarter but are up 5 per cent year-on-year.

Domain Group’s latest rental data showed Canberra had a vacancy rate of 1.5 per cent and rental yields were among the highest in the country at 4.5 per cent for houses and 5.7 per cent for units.

“The fact that unit prices are falling is great news for first home buyers because it makes it more affordable,” Dr Powell said.

“But tight rental conditions are another barrier for those tenants to become home owners.”