Canberra needs to stand by for some earth-quaking changes: Terry Ryder

General sentiment is that property markets will gain new impetus once this weekend’s election is out of the way. But the big exception will be Canberra.

 
Elections should not matter to property investors, as the fundamentals underlying investment change little. The strange habit businesses and individuals have of delaying decision-making until the outcome is known, as if election results are game-changers, never makes much sense.

 
Recently-published research on the pattern of market activity and price growth before and after elections shows there is no pattern. Prices have stalled before some elections in the past, while there has been strong growth in the lead-up to other polls.

 
This year we have seen solid growth in many markets, in defiance of the popular view that prices stagnant when elections are called.

 
Regardless of who wins Saturday’s contest, Australia has a fundamentally solid economy, low unemployment and attractive interest rates. Nothing will be different next week.

 
The investment plan I have this week will be the same one I’m implementing next week.

 
The only difference will be in sentiment. Consumer confidence tends to lift when there is a change of government, as appears likely.

 
That won’t be the case in the ACT, however. Stand by for some earth-quaking changes.

 
It’s pretty clear whoever wins will put the cleaners through the federal public service, particularly if we have a Tony Abbott-led government on Monday morning.

 
Canberra generally has the most consistent city market in Australia. It often has the lowest unemployment and the highest average incomes in the land. That provides a solid under-pinning for property markets.

 
Currently, the ACT unemployment rate is 3.6%, well below the national average of 5.7% and easily the lowest among the states and territories. And, over the past two years, wages have growth in the ACT considerably faster than the national average.

 
The Canberra market, overall, has returned to growth in 2013, in keeping with national trends. While its growth has been a little below average (3.8% in annual growth in dwelling values, compared 5.3% as the capital city average, according to the latest figures from RP Data) it has still been solid.

 
All that will change when a new federal government gives public service numbers a short back and sides. The main public sector union, the CPSU, says around 8,000 public service jobs will be lost under an Abbott government, removing $650 million annually from the Canberra economy. Documents published in the media indicate the Coalition initially plans to cut 6,000 positions, with more to come later.

 
This would replicate the actions of Liberal state governments as they have taken over in Victoria, New South Wales and, especially, in Queensland.

 
The Australia Institute think tank says the ACT is facing a recession as a result of Coalition reductions to the public service. It predicts between 6,000 and 12,000 jobs will be axed.

 
This week the ACT and Region Chamber of Commerce and Industry reported that business confidence in the future of the ACT economy was “in free fall”. Its survey found that most expect the economy to weaken, with employment levels and profits falling or, at best, stagnating.

 
Canberra, therefore, is a market to avoid. Prices are likely to fall.


Terry Ryder is the founder of hotspotting.com.au and you can contact him at ryder@hotspotting.com.au or twitter.com/hotspotting.


 

Terry Ryder

Terry Ryder

Terry Ryder is the founder of hotspotting.com.au.

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