Canberra property market likely to tread water in election year, but not without uncertainty
The surprise announcement by prime minister Julia Gillard this week of a September 14 federal election, setting the scene for a seven-month election campaign, has thrown the spotlight on the Canberra property market more than in previous election years.
Before the announcement, real estate agents were talking about a two- or three-month lull in property transactions, but they now face a much longer period of uncertainty with the prospect that should Tony Abbott triumph, more public servant jobs will go and spending will be reined in.
Answering questions at the National Press Club yesterday, Abbott promised there would not be Max "the Axe” Moore-Wilton style bloodletting, but did hint that jobs would go while a Budget surplus may also be back on the agenda.
Should Labor be re-elected, its abandoning of its budget surplus promise is expected to have less of an impact on the public sector job market, which augers better prospects for the Canberra housing market, heavily dependent on well-paid public servants being able to afford what is the second most expensive capital city housing market after Sydney.
Around one in four residents in Canberra are directly employed by the civil service according to census 2011 and many more in industries that service the public sector.
Certainly anybody working in the Department of Climate Change and Energy Efficiency won’t be signing any new off-the-plan contracts or applying for home loans between now and September.
Paul Powderly, ACT state chief executive at Colliers, says the concern, once the election was called this week, was that there would also be an early caretaker period announced – a period when departments can no longer lobby for fresh funding – but this won’t kick in until August.
While rhetoric from politicians about saving money and cutting jobs will be a factor, Powderly says the residential market is already supported by an overall improvement in confidence about the housing market and low interest rates.
“Prices are down and rates are at an all-time low, so people think they should get on the property wagon,” he says.
“We are seeing increased inquiry and activity at the moment, and while there will now be some caution from buyers we don’t expect a massive drop-off in activity.”
Powderly expects a fair bit of activity in residential markets post-election, but does not expect the market to really take off again until the end of the year or early next year.
On the commercial front, he says people won’t be rushing into new commercial leases, but that things will pick up after the election.
Australian Property Monitors (APM) senior economist Andrew Wilson is also fairly optimistic about the prospects for the Canberra housing market and does not expect the election to have a significant effect, though he does have some concerns.
But he remains confident of his expectation that Canberra house prices will reach record levels in 2013 - currently just 1% off previous peaks.
APM recorded a 0.7% rise in Canberra house price over 2012, with a strong finish to the year as prices rose 2.1% over the December quarter to a median of $566,000. Unit prices rose 3.8% over the December quarter to finish the year almost where they began at $415,000.
RP Data figures released to the end of January suggest this good finish spilled into the first month of 2013 with Canberra house prices up 1.4% and units up 2.5%
Wilson tells Property Observer the fundamentals of the Canberra housing market remain sound.
“There is an underlying shortage of accommodation which keeps demand ticking over, there are low rates and always stiff competition for property, “he says.
The concern though is unemployment, which trended upwards last year and has risen to around 4%
“We need to keep an eye of public service employment, levels, which can be a dampener on activity."
In this regard, a Labor win would be better news for the Canberra property market.
Wilson says Labor no longer being wedded to a budget surplus means that monetary and fiscal policy can start working the same direction.
However, a Liberal victory and a tightening of the public purse could spell further job cuts and do to Canberra what fiscal consolidation in Queensland (and thousands of public servant job cuts) have done to the Brisbane housing market.
“The Liberals are still talking about a budget surplus, which could play on the minds of voters,” says Wilson.
One market that may be impacted by the election is the new apartment market, which according to Colliers International is already plateauing and heading towards a situation of oversupply.
Houses predominate in Canberra, accounting for about three-quarters of the housing stock, but the apartment market is on the rise.
According to the census 2011, just under a quarter of dwellings (23%) in Canberra are apartments or townhouses, this compares with about 18% of dwellings five years ago.
Apartment projects require a certain level of pre-sales to receive financing so those that have achieved enough off-the-plan sales up to now will go ahead but others will likely be placed on hold until after the election.
Ariel Pollard, director of research at Colliers International, says there are seven projects comprising 673 apartments which are yet to commence.
“They are 44% sold and will be under threat of not going ahead if pre-sales for these projects are not met and further developments are taken to market”, she says.
But projects that have been completed or under construction are selling well with 91% and 86% sales rate respectively.
Despite a slowdown in the market, Colliers International says about 559 apartments were sold in the past six months with 76% located in the inner North.
The inner north comprises 14 suburbs and spans an area from the northern foreshores of Lake Burley Griffin, around to the ridges of Black Mountain, Mount Ainslie and Mount Majura.
The total number of apartments in the inner north increased 6% to 1,972 over the final six months of 2012.
Canberra photo by Michael Renner courtesy of Flickr.