Andrew Wilson: Canberra house prices booming but unit prices still falling

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The Canberra housing market continues to strengthen and has now clearly emerged as a top performing capital city.

Latest Domain data reveals that the local market produced a strong result over the June quarter with the median house price increasing by 3.9 per cent to a new record peak of $723,299.

Canberra house prices have now risen by $59,166 over the past year – an increase of 8.9 per cent.

The Canberra June quarter growth rate was the highest recorded by a mainland capital, and well ahead of Sydney which reported an increase of 1.6 per cent.

Canberra’s annual growth rate, however, remained well behind Melbourne and Sydney that reported strong increases of 15.1 per cent and 12.7 per cent respectively.

Although Canberra house prices are rising strongly, unit prices continue to fall, reflecting recent high levels of new apartment supply.

The June quarter median price fell by 2.9 per cent to $403,128 – the sharpest quarterly decline in prices since the September quarter 2004.

Canberra unit prices have now fallen by 3.7 per cent over the past year and are the lowest since the December quarter 2009 – nearly eight years ago.

• Related: Canberra house prices rise, units plummet
• Related: Domain State of the Market Report
• Related: Investors drive Canberra’s property price growth

Canberra house prices will likely continue their recent upward trajectory over the reminder of the year fuelled by heady buyer and seller confidence, a solid local economy and rising migration.  

The rate of growth, however, may decline without the fuel of lower interest rates.

Low and falling interest rates have been a key ingredient for rising house prices in Canberra over the past year.

The outlook for the national economy has improved recently so the prospect for further rate cuts in the near-term has diminished.

The ABS national jobless rate remained steady at an equal four year low of 5.6 per cent over June and signs continue of a resurgence in fulltime employment.

Although optimism is rising, the economy remains fragile and likewise growing speculation of official interest rate increases in the foreseeable future remains fanciful.

Andrew Wilson is Domain Group chief economist. Twitter: @DocAndrewWilson join on LinkedIn and Facebook at MyHousingMarket