Canberra's market is stuck in reverse

There’s only a three-hour drive separating the two places but Canberra and Sydney are worlds apart when it comes to real estate.

That Sydney has been accelerating while Canberra has been in slow reverse is ample evidence that it’s foolish to speak of conditions in “the Australian property market”.

It also exposes the folly of claims of surging house prices across Australia. Nothing is surging in Canberra, other than Clive Palmer’s ego and tendency towards erratic behaviour.

While Sydney has had 18 months of upside, Canberra has experienced a slow and steady trip on the downside.

My research on Canberra for the next edition of The Price Predictor Index shows the trends evident in the two previous quarterly editions have continued – a gradual descend into downturn.

In the May edition I commented that the Canberra market was “going nowhere – neither up nor down - there is little in the way of meaningful growth, with markets stalled by uncertainty and nervousness resulting from the Federal Government’s plans to make big cuts to the public sector workforce.”

In the August edition I noted that the situation had worsened, with a reduction in the number of suburbs with any sort of positive pattern. The upcoming November edition will record a further deterioration in market conditions.

There are no “Rising Fast” markets in Canberra and only five “Rising Steadily” markets.

There remain a dozen suburbs rated as “Consistency” markets. In this regard, the standout precinct is the far north of the city, where new house-and-land sales are helping to maintain steady sales rates.

But the overall message is a marked absence of momentum, especially in the apartment market.

The number of apartment sales has been decreasing steadily for the past two years. In both the September and December quarters of 2012, there were 800-plus apartment sales across Canberra. By the March quarter of this year unit sales were down to 620 and in the September quarter there were an estimated 580 sales.

All of the Canberra markets with strong patterns of declining sales activity are unit markets. The suburb of Bruce, which was typically selling 40 to 50 apartments per quarter in 2012 and 2013, is now managing about 20 sales per quarter.

The biggest single apartment market is Kingston, which had 89 sales in the September Quarter of 2012 and 73 sales in the September quarter of 2013. But it’s gone steadily backwards since then, with only 48 sales in the June quarter this year and an estimated 30 sales in the September quarter.

The number of house sales across Canberra has also decreased, though not as much as apartments.

This pessimistic scenario is now reflected in data on prices and rentals. Domain Group’s September quarter House Price Report recorded a 2% quarterly decline in Canberra’s median house price and a 4% quarterly reduction in the median unit price.

The median rent for houses dropped 3% in annual terns and median rent for apartments is down 5%.

There has been an inevitable weakening of demand as the federal government moves towards giving the public service a short back and sides, while relocating some elements to regional areas where the costs are cheaper.

Terry Ryder is the founder of hotspotting.com.au. You can email him or contact him on Twitter.