Canberra house prices fall due to mild oversupply

Canberra house prices fell slightly over the past 12 months and the market is set to flatten as the city adjusts to the construction boom in the wake of the global financial crisis.

Canberra had one of the country’s strongest responses to the First Home Owner’s Grant Boost Scheme of 2008, which led to the construction of a record number of new dwellings both apartments and house-and-land packages.

BIS Shrapnel recently released figures showing the median house price in Canberra fell by 2 per cent, to $555,000 in the year to June 2011.

But while not so long ago there was a housing shortage in the capital, this deficiency had now shifted to a ”mild excess of stock”.

BIS Shrapnel senior manager Angie Zigomanis said, ”The combination of dissipating pent-up demand pressures, together with the impact of rising interest rates, will have a dampening effect on prices.

”Most of the cities had a strong response to the First Home Owners Grant obviously if you throw money to first-home buyers, they’ll take advantage of it. But in Canberra it was probably more so than some of the other states.”

He said the grant probably pushed a lot of Canberra residents to decide to buy when previously they had preferred to rent.

”It still affected things in Melbourne and Adelaide as well, but those cities probably didn’t have as big a construction response [as Canberra],” he said.

”It probably had enough stimulus effect at the time when it was needed, when the GFC was at its worst point. But it’s probably not as required at the moment, as the idea was to try and get as much mixed construction taking place to create jobs and activity, and try and ward off the effects of the GFC at the time.”

Mr Zigomanis said while building pressures had eased, the market was now set to flatten for a while. ”You’ve got, I suspect, a couple of downward influences there.

”One is the prospect of a rise in interest rates, and another one, which is a bit more of a question mark, is what the Federal Government does to try and get the budget back in balance. If they cut a lot of the government jobs, that might have a negative impact [on Canberra],” he said.

But he said there were unlikely to be any major price declines in Canberra, which has the highest incomes of all of the capital cities.

”This should prevent any major price declines, with the median house price forecast to rise by a total of 8 per cent over the three years to June 2014, which reflects a decline of 2 per cent in real terms.’

Source: Canberra Times


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