John McGrath – Canberra home values keep pace with Sydney
The spotlight is always on Sydney and Melbourne when it comes to Australian property talk. Home values in Sydney, in particular, have dominated dinner conversations and media headlines during the pandemic period and no wonder, given house prices have soared by 30.4% in just 12 months.
But in the background, one of Australia’s smallest cities has actually done just as well as Sydney. Canberra house prices are up by almost the same amount @ 29%; and the house price median is inches away from the million dollar milestone at $985,040 according to latest CoreLogic data.
Canberra is the quiet achiever amongst the East Coast capitals. It’s had a pretty steady ride through the pandemic due to its stable local economy, unique job security being a government town, comparatively low infection rates, fewer restrictions and plenty of stimulus like everywhere else.
As discussed in our McGrath Report 2022, Canberra is our ‘Bush Capital’. It has wide open spaces, a relatively small population of 431,500, low density living and great walkability to amenities.
These attributes, which have become vastly more appreciated during the pandemic, along with a celebrated cultural calendar, blossoming food scene and world class education options, have all contributed to Canberra’s progressively rising home values.
Price growth has been further propelled by a low supply of new land, and strong demand from upgraders leveraging both ultra-low interest rates and reduced stamp duty.
There is also significant first home buyer activity, with June 2021 marking the highest take-up of new first home buyer loans in Canberra since the Australian Bureau of Statistics (ABS) began keeping records in 2002.
Some of its house price growth has been the result of government stimulus, like every other city in Australia. But Canberra is also an impressive first mover in stamp duty reform, and this is helping thousands of people get into the market and/or switch homes when their lifestyle needs change.
Thousands of young buyers have participated in the Home Buyer Concession Scheme, which for the past two years has waived stamp duty on both new and established homes at any price level.
This has created a lot of extra demand for houses over apartments. In FY22, the concession will be capped at homes up to $1 million.
Additionally, stamp duty for other owner occupiers has been further reduced again this year, as part of the ACT Government’s 20-year commitment to abolish stamp duty altogether.
Stamp duty also featured in the ACT’s COVID-19 Economic Survival Package, which introduced stamp duty waivers on residential blocks at any price and off-the-plan apartments and townhouses up to $500,000 for owner occupier buyers in FY21. There was also a substantial discount for off-the-plan purchases between $500,000 and $750,000.
Designed to stimulate jobs and construction, the package turbocharged demand and contributed to a 13% increase in the city’s apartment median over the past 12 months to $547,484. This growth also mirrors Sydney, where the apartment median increased by 13.6% to $837,262.
In FY22, the stamp duty waiver on off-the-plan properties up to $500,000 is remaining in place.
Not surprisingly, investor activity is picking up in Canberra. Latest ABS data reveals new investment loans worth $236 million were issued in June 2021 compared to $84 million a year prior. That’s a massive jump in just 12 months.
Compare the pair. Whether you’d invested in a house in Canberra or a house in Sydney 12 months ago, either way you would have achieved a 30% return on investment (based on capital gains alone). The big difference is the Canberra house would have been about $300,000 cheaper to buy.
Jobs growth and enduring economic strength will likely result in continuing high demand for housing in Canberra over the coming years.
If the city’s growth trajectory continues, Canberra might soon join Sydney and Melbourne as a decoupled market, with property values significantly higher than the other smaller capitals.
To view our suburb picks in the Canberra market for FY22, download the McGrath Report 2022.
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