Canberra stamp duty changes provide incentive to 2024 investors

Canberra’s sluggish housing market is biding time for now, but government incentives kicking in this month are intended to boost density and will create new opportunities for investors.

Supply issues are prevalent, buyer sentiment is cautious, vendor discounting has increased and affordability, particularly in the lower quarter of the market, is described by experts as prohibitive.

These symptoms of a growth slowdown are reflected in CoreLogic data showing Canberra’s dwelling values are 6.7 per cent below the city’s record high, set in May 2022.

Claire Corby, Principal, Capital Buyers Agency, Canberra, told API Magazine the market has been “ticking along” this year, and the two opposing forces of interest rate hikes and supply are influencing vendor reluctance to list.

“It’s almost made buyers go back into their shell a bit too, thinking, there’s not really much on the market to choose from, or that buying now is not super urgent, while interest rates have been getting higher and higher and they’re worried about when they’ll hit their peak.”

The slowdown is widespread according to Canberra agent, Tim Mardiyants, Managing Director, Block Real Estate, who also told API Magazine compared to other major capitals Canberra is one of the poorest performers.

“That’s coming off a really rapid and high growth post-Covid period when we had a massive boom of 20 to 30 per cent and it’s just come down to a more realistic level now.

“The main thing we’ve noticed is the days on market have doubled compared to the last 12 months, and pricewise, when you look at all-homes numbers, the average discount is about five percent compared to the advertised price.

“So, we haven’t really seen huge falls in value, but the slump in demand shows buyers are pickier, and vendors really do need to sharpen their pricing, probably up to five per cent to get the deal across the line, and because there’s not many buyers it’s taking a lot longer to sell compared to last year.”

According to CoreLogic, in the three months to October, the median days on the market for Canberra was 40, compared to 13 in Perth, and the change in sales volumes in the past 12 months have dropped 8.9 per cent, compared to Perth which only fell 1.2 per cent.

The dwelling value change in Canberra over the past 12 months has also fallen 1.6 per cent, and 0.7 per cent of that figure occurred in just the last three months, compared to Perth which saw the highest annual gain in the country over the same period, of 10.8 per cent, with 4.6 per cent of that achieved in the past three months.

Canberra sits alone with Hobart (-4.9 per cent) and Darwin (-1.7 per cent) as the only capitals to record negative annual declines.

Maria Edwards, CEO, REIACT, said the next year for Canberra is difficult to forecast due to fluctuating interest rate predictions and cost of living challenges, but she describes a quiet confidence that the market has passed its trough and is starting an upswing.

“This is being most reflected in homes that require little or no renovation – for the average homeowner the love-affair with the ‘potential’ of a property rather than the ‘actual’ seems to be on the backburner unless the property is sharply priced for a quick sale,” Ms Edwards said.

Ms Corby said there’s been evidence of this in the last two weeks, citing an auction over the weekend saw buyers out in force, which she suggests is because of an uptick of supply from the usual spring surge after the last school holidays.

“I think there is opportunity right now for investors in properties that have good fundamentals, good bones, good locations, knowing over time they can make changes to increase the appeal of the home,” she said.

“In the inner north is an area of Canberra that has seen a big redevelopment of the Dickson, shopping centre. Dickson has had a big gentrification gone through there, in Downer, Watson, Hackett, Ainslie as well.

“Ainslie is everyone’s favourite, it’s one of those really emotional suburbs; it’s got good schools, beautiful wide leafy streets, and there’s a lot of character housing too, so you’ll find a lot of weatherboards, and if you want a cute house with the white picket fence out the front, really leafy presentation that tugs on the heart strings, you’re going to Ainslie.”

Canberra’s best performing suburbs

Despite the subdued market, one of the strongest suburbs performing well identified by Mr Mardiyants is the north Canberra suburb of Crace in Gungahlin, where there has been 15 per cent growth in an otherwise subdued city market.

“There was a master plan community constructed 10 years ago, which won several awards and it’s very resilient, it’s between Gungahlin and Belconnen town centres, 15 minutes down the highway to the city, so very well connected with lots of nice new houses, wide streets, parks; just a really nice area,” he said.

“Then some of the cheaper suburbs like Taylor, on the other side of Gungahlin, has also been resilient and gone up about 5 per cent in the last 12 months and once again the land release happened when it was more affordable, but that’s no longer the case.

“In the last five years, people who bought into the area as the house prices rose and they were constructing those dwellings, means the quality is modern, and they rode that capital growth wave, and the value of blocks also skyrocketed so they had heaps of equity to build nicer houses and there’s a high school there now and a small shopping centre on the way,” Mr Mardiyants said.

Stimulating supply in the nation’s capital

To stimulate supply, the ACT Government will allow owners of large residential blocks over 800 square metres to construct a small second dwelling under a unit title and sell it off individually.

Ms Edwards said it’s a welcome bonus for purchasers, however, the cost to build the secondary dwelling and the lease variation charges given the second dwelling can only be up to 120 square metres in size, remains a concern for owners of the blocks.

In recent weeks, the government has announced a stamp duty concession for owner-occupiers of off-the-plan townhouses or apartments in RZ1-zoned suburban-residential blocks, valued up to $800,000, effective November 27, and follows a concession for properties valued up to $700,000.

“It remains to be seen what practical effect this will have on the supply of properties in the ACT,” Ms Edwards said.

“It certainly won’t lead to an oversupply based on industry feedback, but for those looking for a new build investment property in the ACT it may well offer a good value entry option for a freestanding property.”

Source: CoreLogic