Houses in outer suburbs are in demand. Photo: Michelle Kroll.
An interest rate rise today may see even more buyer pressure on the lower end of the Canberra housing market pushing those prices higher.
Already boosted by the Federal Government’s guarantee scheme for first-home buyers, the under-$1 million market has been the focus of most of the action in January, according to the Cotality Home Value Index.
Buyers seeking bargains and affordability in Canberra’s outer suburbs lifted values by 0.3 per cent, with most of that stemming from those seeking the traditional house and block.
House prices rose another 0.5 per cent to make it almost 2 per cent for the quarter and 7 per cent growth for the year, while units and townhouses slipped – 0.1 per cent for the month but they remain flat for the year.
That has been the story for several months now.
Cotality head of research Gerard Burg said the stronger price growth had been in the Weston Creek, Gungahlin and Molonglo over January.
“What we’ve tended to see is that it’s really in the lower-cost properties that have generally seen much stronger growth,” he said.
Over the year, Tuggeranong values grew by 7 per cent, Belconnen by 6.8 per cent, and Molonglo by 6.8 per cent.
“It’s more on the southern regions of Tuggeranong and the northern regions of Belconnen that are going to see most of the growth, you know, just being the more affordable end of those regions,” Mr Burg said.
He said an interest rate rise might push more buyers into that price range, competing for the few properties available, given that listings have been weak in recent months.
Canberra listings were down -10.8 per cent compared with this time last year.
Tuggeranong values grew by 7 per cent, Belconnen 6.8 per cent and Molonglo 6.8 per cent. Table: Cotality.
The gap between houses and units had consistently widened, supporting the view that buyers continue to favour the idea of a stand-alone home.
“Whether that starts to shift again as we look at it from a more affordability point of view, just the sheer cost of getting in as a first-home buyer, then that might very gradually start to move into a different direction, but for now that seems to be the preference that’s remaining,” he said.
The Property Collective’s Will Honey said the back end of January saw buyers come out, especially for detached houses up to about $1.2 million.
First home buyers were looking at properties under $1 million in those areas on the outskirts, while apartment dwellers were looking to upgrade to a house, in the $1 million to $1.2 million range.
Mr Honey said a clutch of new properties came on to the market after the Australia Day weekend, generating good open homes in Gungahlin, Belconnen and Tuggeranong.
He said the prospect of an interest rate rise had clouded what was looking like a promising start to the year.
But Cotality believed that one interest rate rise would not curtail growth because there were not enough properties on the market.
“This comes back to the constraints on the supply side,” Mr Burg said.
“It’s still incredibly expensive to build new property, from construction material costs through to labour costs and labour availability.”
Cotality estimates that a rate rise would reduce buyers’ borrowing capacity by about $18,000, but it might only increase the number of buyers at the lower end of the market.
“It is really that story on the fringes, and I don’t think that’s likely to change on the back of a rate rise, and indeed it may even intensify,” Mr said.
