Demand outstripping supply: Weekly market wrap with Sam DodimeadBack
Demand outstripping supply in the capital
Canberra is positioned for a critical shortage of housing as the number of properties listed for sale plummets. CoreLogic reported as of 10 January 2021 there was a 39.5% year-on-year reduction in total listings. This was the second highest capital city decrease nationally trailing only Darwin on 42.8%. Interestingly, CoreLogic’s Monthly Home Value Index showed Darwin was the only capital city to outperform Canberra achieving a 9% increase in dwelling values compared to 7.5% over the 12 months to December 2020.
Market dynamics in Canberra have demand considerably outstripping supply. Unfortunately for would be buyers frustrated with missing out on properties because another purchaser saw greater value, the market will likely get more competitive in 2021, seeing prices continue to increase, adding to what are already record high property values.
CoreLogic data shows the middle band of the market is seeing values increase the fastest achieving 8.4% growth in 2020. This was followed by 7.2% for properties ranked in the top band and 5.7% for the most affordable part of the market. This is good news for those seeking to start their journey into property ownership as gains in the most affordable part of the market slightly lag the other parts. It does, however, show those looking to upgrade or downsize into the middle of the market face the most competitive conditions.
Gains of any description in 2020 seemed impossible for property analysts to comprehend back in March. As explained in this column repeatedly, Canberra has historically proven exceptionally resilient to adverse market forces due to our superior economic composition to other jurisdictions. COVID-19 was unlike other times of adversity, however, property owners in Canberra saw values increase by 5.8% from March to December.
Rental market sees competitive conditions
The rental market is also experiencing competitive conditions. SQM Research reported the December vacancy rate had increased month-on-month to 1.1%. Year-on-year this is 0.6% lower than the 1.7% vacancy rate reported in December 2019. A sign of the times, on Saturday 16 January a colleague of mine reported meeting 80 groups at a rental inspection in 15 minutes.
Demand from tenants has seen rents increase by 3.4% for houses and 3.1% for units over the December quarter. Historically low interest rates, rising rents further improving already strong rental yields, rising property values and low vacancy rates enhance the attractiveness of residential property investment. As this year progresses, I anticipate investors chasing yield, especially those residing interstate who will reassert themselves into the market, creating significant competition across the most affordable dwelling types.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward deliver of new buildings. Stream from wherever you listen to podcasts.
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