Undersupply of houses, population growth to drive Canberra prices: John McGrath

Undersupply of houses, population growth to drive Canberra prices: John McGrath
Undersupply of houses, population growth to drive Canberra prices: John McGrath

House prices growth in Canberra is expected to top other capital cities between now and 2020, according to property expert John McGrath’s recent article in Switzer.

This growth will be drive by a 16% rise in population growth, continuing high incomes and a shortage of detached housing stock, said McGrath, citing data from economic forecaster BIS Oxford Economics.

Canberra also recorded its highest Winter auction clearance rate since 2009 and the fourth highest clearance on record at 69.2%, according to Domain. 


It was the best performing capital last weekend.

However, the capital’s two-tier marketplace: a rise in detached home prices and stagnation in apartment prices, is highlighted by the recent McGrath Report 2018 which says the national oversupply of apartments will see Canberra become one of only two capital cities with any apartment price growth by 2020.

Undersupply of houses, population growth to drive Canberra prices: John McGrath

Median house prices in Canberra grew a solid 6.6% to $650,000 over the year to June 2017, according to CoreLogic, meanwhile apartment price growth was sluggish at just 2.9% to a median $442,500. 



“Restricted house stock is attributable to a decline in new construction and the ongoing impact of more than 1,000 asbestos affected ‘Mr Fluffy’ blocks being removed from the market under compulsory acquisition by the ACT Government in 2014,” says McGrath in Switzer.

So far, only 400 remediated blocks have been released back into the market.

“Lack of stock is also contributing to a projected pick up in the renovations sector after a contraction of 6.1% in FY17. A lack of choice in the marketplace is driving some home buyers to stay put and renovate instead, with the Housing Industry Association forecasting renovations activity to increase by 5.1% during 2017-18.”
 


Apartments and other non-detached housing make up 80% of dwelling approvals in Canberra, according to the HIA, while real estate firm JLL estimates a pipeline of 7,000 new apartments for the city by 2021. 


The apartment market is already in oversupply but a low vacancy rate of 1.7%, coupled with strong yields, is keeping apartment prices in slightly positive growth territory, he adds.


Canberra’s median rent of $420 per week and median yield of 4.9% is expected to continue rising in the short term due to population growth, low numbers of first home buyers and an underlying shortage of rental accommodation. 


Population grew 11% in the ACT between 2011-2016, the largest of all states and territories and equivalent to more than 40,000 new residents, according to the Australian Bureau of Statistics (ABS).


The ACT government expects further strong population growth of 6% in Canberra by 2020. About 60% of this growth will be driven by natural increase (births minus deaths) and around 40% through net overseas and interstate migration. 
 
This growth is being supported by major new public projects like the $700 million citywide light rail network, with the first stage connecting the CBD and Gungahlin next year; and a revitalisation of the city precinct.

A big ticket housing project for 2017-18 will be the replacement of the Red Hill public housing units in the prized inner south. The new residential development will include 108 single dwelling sites, four multi-unit sites and six green spaces. Another 92 townhouses and apartments are planned for three blocks in Holder, Chapman and Wright. 



With its selection of art galleries and vibrant restaurant scene, Canberra is shedding its stuffy reputation and becoming an attractive lifestyle and cultural destination, says McGrath, predicting better times ahead for the capital city.

 

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Canberra John Mcgrath

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