Canberra’s property market defies trends

Canberrans could be forgiven for holding off riding the waves of house hunting, due to the assumption that there will be a downturn in the property market, especially given recent news reports of the downturn in the Melbourne and Sydney markets. Unfortunately for those holding out, Canberra has done the complete opposite and managed to record another year of increases to property values.

According to Core Logic, property values in Canberra rose by 2 per cent in the year compared to Sydney which dropped by 6.1 per cent. Despite the positive figure, it doesn’t mean that Canberra is protected from the downfall experienced in other capital cities. The increase in Canberra’s property prices can be largely attributed to house values rising by 3.1 per cent in the past year.
Looking across the current Canberra landscape, it is hard to miss the sea of cranes, with apartment complexes filling every pocket and new homes popping up in the older Canberra suburbs due to the Mr Fluffy scheme.

The next twelve months will be interesting to witness whether Canberra’s property market will continue to defy national market trends and increase or will it experience a dip due to tighter lending practices and the prospect of further regulation on the back of the findings of the financial services royal commission, which will be released in full early next year.

It’s strongly believed that commissioner Kenneth Hayne will recommend banks conduct more thorough checks to ensure borrowers can pay off their loans, with full income and expense verification to assess their capability to pay. Already, borrowing capacity for owner occupiers has been cut by 7 to 10 per cent, and 20 per cent for investors. As mortgage brokers, we have already experienced banks tightening their serviceability metrics and increased requirements when submitting loan applications.

The factor which will play a pivotal role in Canberra’s property market in 2019 will be interest rates. While we are still experiencing record low interest rates and they are likely to remain stable at least until mid-next year, we have experienced three of the big four banks increasing their variable home loan rates.

It’s difficult to comprehend rates rising when they have remained stable for so long, but prospective and existing home owners need to consider whether they are prepared financially for a rate rise and what they might do if the value of their property went down instead of up.

At the moment the Canberra property market offers a slight respite to both those buying and selling, compared to other major cities along the Eastern coast, but we can’t pretend it’s forever.