A Canberra review: Looking back on the capital's property market

It was a tale of two halves for Canberra house prices in 2019. The year began with the housing market showing the first signs of price weakness since 2012. Despite prices fluctuating over three-quarters of 2019, annual growth remained positive but subdued.

The nation’s capital avoided the larger price falls that had unravelled in Sydney and Melbourne. However, the peak of the Canberra price upswing remained firmly in the rearview mirror. It was two years ago when annual house price growth reached a high rising by double-digits.

Historically, a pullback in house prices has a tendency to be short-lived and relatively minor, with the exception of the 1994-97 downturn. Over the past two decades, there have been only a handful of times house prices have reversed over the year. I had little doubt that the period of softening notched early in 2019 would be short-lived rather than a price correction.

Mid-year the Canberra property market pivoted. With the year ending in a stronger position than it began. House prices rebounded in the final quarter of 2019, producing the steepest annual growth since 2017. To put this level of growth into perspective, the pace is roughly four times higher when compared to the growth recorded in 2018.

Clearance rates provide a timely insight into buyer appetite. For houses, the clearance rate in 2019 was 59 per cent, roughly on par with the year prior. For units, auction performance does fluctuate, given the small number of apartments going under the hammer.

Overall monthly clearance rates help to depict a clear turning point. By September 2019, auction clearance rates pushed higher compared to the same period the year prior. Following this point in time, clearance rates continued to track higher peaking at 67 per cent in November. 

Auction volumes were lower over 2019 compared to the year prior, in part helping to support a rising clearance rate. As confidence rose, vendors started to return to the market later in the year, and this is likely to continue in 2020.

2020 has started with a stronger auction performance than the last year ended. Preliminary Saturday clearance rates have twice pushed passed 80 per cent in February, and the month is only half way through. 

A number of factors came to fruition in the latter part of 2019 that have helped to stimulate the property market, ultimately supercharging Sydney and Melbourne price recovery, and having a positive impact on Canberra and most other capital cities. 

The Reserve Bank cut interest rates three times during 2019, the cuts were in quick succession of one another. Buyers are taking advantage of improved affordability as they become enticed by low mortgage rates and an easing in serviceability assessment, allowing many to take on bigger home loans, ultimately helping to push prices higher.

Early in the year the federal election may have weighed on local confidence with buyers and sellers delaying property decisions. However, post-election certainty may have helped to lift sentiment as speculated changes to property taxation were off the table.

First-home buyers have also been given a lifeline from both federal and local government initiatives, which should help to support some new homeowners. 

Canberra continues to shine, providing residents and luring new ones with growing job prospects, a high average wage, low unemployment and a growing educational sector, which will continue to support the demand for housing. It is no wonder that population growth continues to run faster than most other jurisdictions.

The tale of two halves ended in a stronger position. The year ahead looks set to provide homeowners with steady equity growth. Forecasts suggest Canberra house prices could close this year 4 per cent higher.