The Canberra housing market is showing signs of stabilising as the rate of decline eased in February, with experts warning that further interest rate rises are imminent.
Latest data released in the CoreLogic Hedonic Home Value Index on Wednesday (March 1), shows Canberra dwelling values fell by 0.5% last month, marking a 6.7% decline in property prices in the past year.
Unit and apartment prices in Canberra remained stronger than houses over the past year, with units sustaining a 0.5% fall while houses were hit by a heftier decline of 8.4%.
The median property price in Canberra is now $833,155 – the second highest to Sydney where the median is $1,006,923.
MARQ Partner and Licensed Agent Craig Chapman said this week’s announcement by Prime Minister Anthony Albanese to tax superannuation accounts more than $3 million meant further unease, as Australians grappled with skyrocketing cost of living pressures.
“There’s a bit of a feeling of stabilisation in the market at the moment,” Craig said. “But that is being offset by a range of external factors, including the threat of continued interest rate rises, a cohort of fixed rate mortgages coming to an end, and now the Federal Government’s plan to tax superannuation. It’s got prospective buyers even more apprehensive.”
Craig said CoreLogic’s February data showed signs of positivity for the Canberra market, but buyers and sellers had to be realistic about the current conditions.
“There has been a softening of the falls,” he said. “After such great ascent in price, this is a minor correction, which after the massively sharp period of growth that we’ve had, is the stabilisation that had to happen.”
While there was some trepidation by buyers in the upper price brackets, first homebuyers were keeping the sub-$600,000 market active, he said.
“First homebuyers are still out and about. Many of them are looking at the cost of rent, because in Canberra the yield is so high, and are comparing that with the cost of buying their own home.”
Rental price increases for houses in Canberra are more subdued at 0.8%, compared to units and apartments where rent prices surged by 4.0% over the past year. Canberra’s rental yield remained stable at 4.1% compared to the previous month.
The Reserve Bank of Australia has foreshadowed another interest rate rise when the Board meets on Tuesday, March 7. Since May last year, the RBA has raised the cash rate by 3.25% – the highest in 10 years.
“Prices are holding up because stock levels are still drastically low. I think we’re still 30% down nationally on stock and in Canberra we’re around 30-40% down. Less stock and less buyers mean less activity,” Craig said.
“For those considering selling, the reality is if you bought before 2020 and you’re selling now, you’re going to get a good result than if had you sold prior. However, if you bought between 2020 and now – it would be wise to hold.
“It’s important to remember that the property cycle is generally seven to 10 years and this has only been a period of seven to 10 months. We’re still in for good times but we know a storm is brewing.”
CoreLogic Research Director Tim Lawless said the national stabilisation in housing values in February coincided with consistently low advertised supply levels and a rise in auction clearance rates.
“The past four weeks have seen the flow of new capital city listings tracking 17.0% lower than a year ago and 11.9% below the previous five-year average,” he said.
“This trend towards a below average flow of new listings has been evident since September last year, coinciding with a loss of momentum in the rate of value decline.
“Considering the RBA’s move to a more hawkish stance at the February board meeting, along with an expectation for a weaker economic performance and a loosening in labour markets, there is a good chance this reprieve in the housing downturn could be short-lived.
“We also have the fixed-rate cliff ahead of us; arguably the full impact of the aggressive rate hiking cycle is yet to play out.”