Canberra house prices surge as unit prices take a dive: report

The Canberra property market’s spring boom period has paid off for homeowners with a record 5.6 per cent surge in house prices over the December 2016 quarter.

The result contributed to a 5 per cent jump in house prices over the year to a median of $684,395, according to Tuesday’s Domain Rental and House Price Report.

Median unit prices dropped 2.2 per cent over the quarter to $413,697 – the lowest annual result since 2012.

Domain Group chief economist Andrew Wilson said most capital cities finished the year on a high in terms of house sales.

He said interest rate cuts in May and August added momentum to what is “traditionally the strongest part of the year”.

“When we look at the quarter compared to the year we can see that most of the price growth came in the December quarter,” he said.

“The Canberra market was certainly in catchup mode over a long period. No doubt that reflects an improvement in the local economy, high levels of migration and confidence returning to the market – and that’s an important factor.

“It is one of the strongest markets at the moment.”

Dr Wilson said the latest quarterly data could be volatile given the size of the ACT market however, it was a good result for homeowners.

More than one-third of Canberra’s suburbs had their highest ever residential sale in 2016, with many of these records smashed in the last three months of the year. 

Allhomes data scientist Nicola Powell attributed recent growth to the gap between housing supply and demand.

“The whole market has really been driven by a shortage of stock and high demand for houses,” she said.

“I think the middle-to-upper market is really pushing the housing market forward. It’s such a low interest rate environment which encourages people to upsize.”

Dr Powell said low interest rates, and more affordable prices than in Sydney and Melbourne, may have encouraged workers moving to the territory to purchase property sooner, rather than rent.

Among Australia’s capital cities, Canberra recorded the second-highest quarterly jump behind Hobart’s 6.2 per cent surge.

The ACT’s annual result came in at a more modest fourth place, with a strong December quarter result balancing out a small drop in house prices over the March quarter.

In contrast, Canberra’s unit prices fell 2.6 per cent over the December quarter, the second-worst result behind Brisbane’s 5.7 per cent drop.

It comes off the back of a 1.3 per cent price increase over the September 2016 quarter.

Dr Wilson said new development across the city pushed unit supply ahead of demand, contributing to an annual fall of 2.2 per cent.

“We’re seeing that and a weakening of prices growth,” he said.

“I think the Canberra unit market remains remarkably positive for further demand levels, particularly from investors. Canberra yields are quite high and that reflects what’s still a very tight rental market.”

Dr Powell said 2016 represented the highest number of building approvals on record, fostering Canberra’s development boom.

She said units offered a more affordable alternative to standalone houses.

“With house prices being so high and forging on, this is definitely a good thing for first home buyers in our market,” she said.