Canberra punching above its weight: Weekly market wrap with Sam DodimeadBack
Canberra continues to punch well above its weight
During the last few months, perception of adverse market forces has played havoc with the psyche of buyers and sellers. Once the initial shock of restrictions introduced to stop the transmission of COVID-19 had passed, the underlying strength of our property market became evident. This is largely due to the proportion of Canberrans employed either directly in the public service or adjacent industries.
Reflecting on some of the ‘wild’ forecasts garnering the most media attention, their modelling focuses on unemployment, market sentiment and foreign investment. They argued rapidly rising rates of unemployment, buyer and seller perceptions, and prices adjusting lower would be detrimental to property values. Removing foreign investment would be the crushing blow for residential property owners in Australia’s capital cities.
Canberra has outperformed forecasts by a significant margin. On 17 April, the Commonwealth Bank forecast property values would fall by 10% during the following six months. By 1 June, CoreLogic’s Monthly Home Value Index had shown property values in Canberra remained flat during April and increased by 0.55% during May. Now there is a mountain of evidence indicating there is plenty for property owners to be optimistic about.
The unemployment rate in Canberra fell from 4.3% to 4.1% during May 2020 and was the only jurisdiction nationally to do so. As trade restrictions on businesses are relaxed and a greater number of businesses resume operating at full capacity, it would appear likely the unemployment rate will continue to fall.
Low stock volumes see favourable conditions for sellers
Stock volumes are low; the number of established properties advertised for the first time on Allhomes has been hovering in the low 100s since the end of the first week in May, cracking 110 new established listings in a week twice, only to fall below again the following week. Lack of choice has created favourable market conditions for sellers, evidenced by Canberra recording the highest preliminary auction clearance rate nationally of 80% on Saturday 20 June.
Another indicator of market strength is the rental vacancy rate which, according to SQM Research, in May 2020 was 1.3%. For comparison, in May 2019 their data shows the rental vacancy rate was 1.2%, indicating there has been negligible impact on the rental market. Asking rent had fallen month on month to 12 June by 1% for houses and were flat for units. Yields remain solid and attractive for investors.
Migration was the last risk to the market, however, our local construction industry had already been trending towards moderating volumes. Australian Bureau of Statistics data year on year new dwelling approvals data to April 2020 shows new dwelling approvals are down 27.7%. This is a significant reduction in supply which will go a long way to offsetting any potential reduction in demand from overseas migrants.
Historical market resilience of property values in Canberra remains proven. For property owners, there is plenty to be optimistic about, however data provides a compelling case that those waiting on the sidelines to time their entry into the market are at risk of being left behind.
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