When is a good time to buy property in Canberra?

I would highly recommend people do their own research with sites like:
http://www.sqmresearch.com.au/graph_stock_on_market.php?region=act%3A%3ACanberra&type=c&t=1

For me, the Canberra market is highly oversupplied with 2 bedroom apartments and with many more developments still happening combined with limited people entering the market should mean some good buys from distressed buyers whose negative gearing gambles have backfired.

arescarti42 said :

My advice is wait and see, the fundamentals are basically the opposite to that which drove the unprecedented boom from ~1995-2010.

We’ve got public service job cuts, rising unemployment, high levels of new housing supply, low levels of population growth, and the lowest levels of income growth in half a century lined up.

We also have Sydney prices coming off the boil which could have a flow on effect here.

I’m certain that the rises we saw a decade ago are something that will not be seen again for decades. Those rises we saw back then, combined with the ever increasing cost of utilities have effectively taken a large percentage of potential buyers out of the owner occupier market. This helps to contribute to keeping demand and supply in check, combined with the other factors mentioned above by arescarti42.

Nobody giving advice here has asked you for more information. To properly advise you we need to know what your situation is. I can only assume that you will be an owner occupier, or are you looking to buy only for investment purposes, or both. Do you have cheap accommodation at present, such as living at home with your parents, or are you forking out for rent. Married with two incomes? kids? etc.

Prices certainly haven’t come down anywhere near enough for me to say “yeh jump in now regardless of your personal circumstances”

My advice is wait and see, the fundamentals are basically the opposite to that which drove the unprecedented boom from ~1995-2010.

We’ve got public service job cuts, rising unemployment, high levels of new housing supply, low levels of population growth, and the lowest levels of income growth in half a century lined up.

Even with interest rates at record lows, it’s still considerably cheaper to rent, so why would you want pay a premium to buy now?

That said I think it’s unlikely the budget alone will cause a crash, the crash will come with some major external shock to the Australian economy, and when it does, it wont be just limited to Canberra.

A “bargain” isn’t necessarily a cheap property.

Some very sensible posts here, IMO.

I agree there will be no immediate or drastic drop in prices. The budget’s APS cuts are not as bad as the CT is making it out. In fact, the largest threat to house prices will probably come from the CT’s hyperbolic talking down of Canberra’s economy!

As has been pointed out above, house prices have, in real, inflation-adjusted terms, been declining for 3 years. The APS cuts have already been priced in to a significant extent. Good interest rates, low supply and PSS retirees taking VRs should help sustain the market.

I think the stagnation will continue — and outer suburbs, new developments and apartments will be particularly vulnerable. But the established suburbs should come through it ok. Now is a good time to enter the market, but you have time on your side. That gives you the luxury to examine the market carefully and wait for a very good deal.

The outer suburbs and Gungahlin may crash, but the inner areas will probably keep their value.

VYBerlinaV8_is_back said :

davo101 said :

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

Interest compensates the lender for loss of value of the borrowed money due to inflation, plus some for profit. This simply translates to their being a ‘cost’ for borrowing the money. Equally, a non homeowner pays rent as the cost of shelter. The difference, though, is that the loan amount of the buyer is fixed at a point in time, and reduces in real terms going forward, whereas the rent tends to rise with inflation.

In the real world there are some slight variances (e.g. interest rate changes, CPI changes, etc), but the basic effect is there.

Inflation has definitely made my payments easier than they were in the past. And the difference between payments at what is effectively a fixed level and rising rents has meant my tenants now pay all my holding costs for my investment properties.

Good buying plus plenty of time equals low cost of housing going forward.

If you are living in cheap digs, why not buy and let the tenant meet the better part of your costs? If you look hard enough there are properties out there that are renting for just under or over the costs of ownership.

+1 for no crash. We’ll be at decade lows within the next year or two then it will be up up up from there.

davo101 said :

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

Interest compensates the lender for loss of value of the borrowed money due to inflation, plus some for profit. This simply translates to their being a ‘cost’ for borrowing the money. Equally, a non homeowner pays rent as the cost of shelter. The difference, though, is that the loan amount of the buyer is fixed at a point in time, and reduces in real terms going forward, whereas the rent tends to rise with inflation.

In the real world there are some slight variances (e.g. interest rate changes, CPI changes, etc), but the basic effect is there.

Inflation has definitely made my payments easier than they were in the past. And the difference between payments at what is effectively a fixed level and rising rents has meant my tenants now pay all my holding costs for my investment properties.

Good buying plus plenty of time equals low cost of housing going forward.

VYBerlinaV8_is_back said :

inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices)

Kinda. Mr Interest is always waiting in the wings to make sure that the balance of the loan will increase in real terms. And borrowing on the assumption that inflation will make future payments easier is not always a good idea as any HomeFund borrower will tell you.

davo101 said :

VYBerlinaV8_is_back said :

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

Given that in real terms the established house price index in Canberra is back to where it was in September 2007, you’ve got plenty of time. In fact since March 2010 the established house price index has gone nowhere (March 2010: 102.0 March 2014: 101.5) in nominal terms.

That’s right. Reduction in real prices through inflation (which, incidentally reduces the real value of your home loan regardless of the direction of house prices) is the bit the people who believe there will be a crash tend to miss.

VYBerlinaV8_is_back said :

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

Given that in real terms the established house price index in Canberra is back to where it was in September 2007, you’ve got plenty of time. In fact since March 2010 the established house price index has gone nowhere (March 2010: 102.0 March 2014: 101.5) in nominal terms.

teejay said :

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

That’s what I was thinking too. I think now would be a good time to buy property. Don’t wait until people are calling “the property market is recovering” because by then it is too late!

Now’s not a bad time, but there’s no rush. Prices won’t be increasing within the next few years, so hunt around for a bit until you spot a bargain.

I bought an investment property during the last property slump, when Howard was in. It was a very good buy in an inner suburb, and I was very lucky. I didn’t get the bottom of the trough, but just as prices began to rise. Six months earlier, the same design house in the area sold for 25% less, but still three months after I bought the house, a similar house sold for 25% more. I bought it just in time; while I could still afford it. If there is a slump like last time there might be bargains again. But know the market. At the time I did and because the market was extremely weak I was the only bidder and was able to negotiate thousands off the reserve price. But only I suspect because I knew what other similar houses in the area had sold for and was able to use the prices they went for as a bargaining tool.

VYBerlinaV8_is_back said :

We’ve already had most of the ‘crash’.

That’s what I was thinking too. I think now would be a good time to buy property. Don’t wait until people are calling “the property market is recovering” because by then it is too late!

Picking the peaks and troughs of a market is never straightforward. Perhaps someone in the ABS could help you.

We’ve already had most of the ‘crash’. Even in 1996, when the ax was taken to the PS in greater (relatively) amounts than now, property didn’t crash.

The trouble in Canberra is that there is a lot of c#$p property in the market, especially in the outer suburbs. I’d suggest getting your finance organised and starting to look at areas you’d like to live, get a feel for prices and availability, then when you see something you like swoop in quick and make an offer (try lowballing a few and see how you go).

As many here know, I’m a property investor, and I’m keeping a close eye with a view to buying in in perhaps 2-3 years time. I expect Canberra properties to be about double their current prices by 2030 (in nominal terms).

Prices may drop, but I’m not sure your expectations should be to pick up a $650K house for $400K, for example.

Do you want a house or would an apartment be okay? If the latter it can be advantageous to purchase off the plan as you can sometimes buy a bit cheaper then.

If you want a house just keep an eye on the areas you’re interested in, go to open houses and auctions etc, you’ll quickly get a sense of what’s good value and what’s not.