Canberra has its own unique property drivers, meaning that investors need to plan their steps even more strategically here than they would in other city markets.
Daniel Owers, director of DNA Property Holdings and a property developer in Canberra, explains: “It’s a little bit of an unknown for those outside of the Territory,” he says. “It’s in its own little bubble and its own little world in Canberra.”
In fact, the market is typically independent of the rest of Australia, rolling through its own troughs and peaks – and with investors frequently steering clear of it.
According to Robert Mellor, managing director of research house BIS Shrapnel, you need only look at its peculiar property values to start to understand why.
“Canberra has relatively high median house values, but also the lower quartile price is high, somewhere in the region of $430,000,” Mr Mellor says. “On the other hand, the upper quartile is $625,000.
“It’s certainly quite different from the Sydney and Melbourne markets,” Mr Mellor explains, pointing to the lack of market fragmentation as one reason why investors with low price point strategies currently avoid the area.
Australian Property Monitors’ senior economist, Andrew Wilson, adds that the high lower quartile price is due to interest from a number of different buyers and that it actually can be a positive boost for the market.
“There’s a lot of competition from buyers at that bottom end, often from first time buyers or people moving from interstate or overseas,” Dr Wilson says. “At the end of the day, that competition can drive prices growth. If you can secure something in Canberra, the prospects of pretty solid growth are always there, notwithstanding what happens in terms of the broader economy and the political environment.”
The underpinning drivers
The ACT can be distinguished from other expensive, non-resources driven capitals by its homogenous market, which appears to have little in terms of a ‘prestige property’ category, according to Dr Wilson.
“There tends to be less disparity between the high and low ends of the wages spectrum, in terms of the typical wages that support a Canberra household,” he explains. “So, it tends to be crowded around the centre there in terms of prices.”
Similarly, a shortage of land due to restricted releases has brought strong demand in the lower price brackets.
“This puts upward pressure on prices at the entry level in that there is a shortage of new residential property available,” Dr Wilson says. “Broad acre releases are made difficult by the cost of infrastructure, and this is specifically the case in Canberra.”
Median house values, as well as price growth, are also reflective of wages and the employment landscape in the nation’s capital.
“Certainly, Canberra is typified by the nature of its employment and its economy,” Dr Wilson continues. “It’s very heavily attached to the public service [cycle] and it is attached to the economic cycle and also to the political cycle.”
Mr Owers adds that an impending change of government can have an impact on sentiment, as much as it can on employment levels.
“A change of government can have a big effect, and it can cause some uncertainty,” he says, explaining that renters find it easy to exit the market when the job market is poor.
While Canberra also has a strong student market, as well as outlets for tourism and retail, the bottom line according to Mr Mellor is that the city runs primarily off public sector employment.
“If the public sector is growing then there tend to be more people based in Canberra,” he says. “The government is a big machine these days and people are in consulting businesses, and they have a Canberra office because the market is big enough to justify that.”
If the government cuts back on expenditure, however, then a softer outlook is on the cards for those with a stake in ACT property.
“You can normally expect that a Coalition government would be tightening up on expenditure [and therefore] tightening up on consultants, whereas Labor governments tend to have been using a lot of consultants and that has probably been good for Canberra over the last four and a half years,” Mr Mellor says.
The broader economy and political cycle should be seen as uncontrollable forces in a market already prone to moving quickly.
These effects, however, “do wash through the system with time”, according to Dr Wilson, with other small industries– such as the education sector – surrounding this main driver and making the ACT market slightly less sensitive than it was 20 or 30 years ago.
“But mainly people move into Canberra for job opportunities so there’s always a sense of people moving in and overall growth when public service is growing,” he says.