Now is the time to buy; prices are soon to go up. Unless you are selling, in which case now is the time to sell; there are plenty of buyers for your area now, but they won’t last.”
That is the real-estate industry view of the Canberra residential market between, say, 1913 and through to the indefinite future.
But what is really happening in the Canberra residential market now?
There are several influences. First, the rest of Australia coming out of recession is starting to have a significant impact. Second, a major fragmentation of the market. Third, in-fill.
The recession has affected the residential market in Canberra in different ways than the rest of Australia and it has affected the residential market in a different way than the commercial market.
At the height of the recession, many people moved from the rust belt of Victoria, South Australia and Tasmania to places of higher employment prospects: Queensland, Western Australia and the ACT.
In 1991 and 1992, the ACT had an annual population growth of nearly 3 per cent, the highest in Australia outside some odd pockets. It is now down to 1.3 per cent.
Residential property turnovers were 6375 in 89-90. In subsequent years it rose to 7863, 8712 and 8704. In 1991-92, in the guts of the recession we had to have, Canberra had a record residential property turnover. Also, the Housing Trust had a marked increase in the waiting list during the recession, which is now tapering off.
The 1992-93 turnover of 8704 has fallen to 7990 in the financial year just gone, a fall of 8 per cent. More significantly the second six months was 12 per cent lower than the first six months (with no significant seasonal differences).
In short, as the rest of Australia moves out of recession, people are moving out of Canberra to seek jobs elsewhere and fewer people are moving here. There is an oversupply of residential housing. That is reflected in the official vacancy rate of 5 per cent. After seasonal adjustment, the vacancy rate has been on a steady rise a December 1991 low of 1.1 per cent to the present 5 per cent.
The vacancy rate reflects in median house prices. There was a steady increase from $120,000 in February 1991 to about $160,000 in May 1993 and then it has been flat ever since.
May 1993 was not a good time to buy.
The chief executive of the Real Estate Institute of the ACT, Bruno Yvanovich, says that as an Australian it is good to see the country coming out of recession, but in the short term that has not been good for parts of the Canberra market. However, after that short-term adjustment he says the fundamentals are good for investment in Canberra.
That is the overall picture. Others say there is no such things as the Canberra real-estate market.
“”The market is very differentiated now,” says Peter Jansen of Cotswold Real Estate. “”People who disobeyed the fundamental law of real estate _ location, location, location _ are now paying the price.”
While some agents are talking up good investment prospects with zero vacancies in some areas, Jansen says, “”That must mean some very high vacancy rates somewhere else”.
He estimates vacancy rates in parts of Tuggeranong at 12 per cent.
“”And it is no good just reducing the rent till you get a tenant, because you then get the wrong sort of tenant.”
Overall vacancy rates are not always a good test. The length of time between re-letting gives a better picture. It can take two to three months to get a suitable tenant at a reasonable rent in parts of Tuggeranong.
This is very good for the “”To Let” section of the classifieds which helps pay my salary.
In the inner north and inner south, however, agents either do not have to advertise because they can fill from their inquiry list, or they only have to advertise for a very short time.
In short, people who listened to the gurus of negative-gearing investment without also considering the location edit and bought investment properties in Tuggeranong got their fingers burnt and had to sell at a loss or will have to wait a long time to get back to profit.
Other agents say “”one bus to Civic” is a major factor in renting.
A large and continuing factor in the differentiating market is in-fill.
Some young, childless and retired people are preferring to live close to the centre of town than going out to fringe. Many want smaller or no gardens. They want to walk to work or take one bus and not pay for parking. They also want a heated swimming pool and tennis court looked after by a body corporate.
The Monterey development opposite Glebe Park was a good example. Nearly all the units have been sold of the plan.
Leaving aside the politics, economics and the affect on existing residents (see report below/left/right), in-fill has satisfied a demand that had previously been satisfied by cheap houses on the fringe. So the value and occupancy rates of three-bedroom one-bathroom places on the fringe have fallen. For the same price or rent there is an alternative closer to town.
To a lesser extent in-fill has taken some of the stylish living market from the suburbs. People who have to show their wealth somehow now have the alternative of showing it in a luxury unit.
In-fill has not changed the market for larger houses that suit families with the two or more children in the fringe. In-fill does not provide an alternative for them; they have to go to the fringe unless they are very wealthy.
The developer proponents of in-fill say the market proves that the demand is there for medium density close to town, and that is true. The other questions are how much demand, how long will it last, what affect will it have on the market for existing dwellings? (see adjacent report).
Ron Bell of Bell and Associates says that while there is a general over-supply, the market in quality units in the inner area is travelling well.
He expects the over-supply to disappear by the end of the year.
Vince Heffernan a manger at the Independent Group says all but a couple of the units at the ANZ building in the heart of town have been sold. Commercially, they are unique a combination of easier planning rules on Ainslie Avenue, low commercial demand at the time and the economic age of existing building having run its course. Now the commercial market has picked up, he thinks it unlikely that the sums would add up for another inner city to be redeveloped residential rather than commercial for some time.
The chief executive of the Housing Industry Association, Larry King, says the changing nature of families and exposure to international influences are likely to result in continued high demand for higher-density inner city living and a demand for more choice in housing.