When the GFC hit in 2008, for many people it felt like Armageddon. And with capital growth of approximately 20% in the preceding 2 years, Canberra real estate prices took a breather and were flat for the 12 months that followed.
There was however a noticeable decrease in transaction volumes, which fell by 20%, at the same time when the interest rate on the average household mortgage also dropped by nearly 300bps. This represents a reduction in confidence from buyers, and is a direct reflection of the crash of global sharemarkets.
With pressures from the Eurozone ramping up and impacting investors, interest rates falling and allhomes.com sales projections for 2012 (assumedly based on YTD sales) pointing to sales volumes falling by a 25% in 2012 (to their lowest level for 15 years), 2012 is starting to sound a lot like 2008!
The only difference this time around is that we haven’t had the 20% increase in prices over the last 2 years, as the increase in supply has helped kept a lid on price rises for the last 2 years.
With that in mind we are expecting limited capital growth in the Canberra real estate market over the next 12 months.
However there is some blue sky, with selected pockets of the Belconnen market in particular remaining in high demand. On the weekend just passed (Saturday, 19th May) Ray White Belconnen had two stark reminders that there are still buyers in some areas of the market place.
3 Alinda Place, Giralang received 26 inspections, with 6 offers to purchase, and 8 Apsley Place, Kaleen had a huge 31 in the lead up to Auction day. These numbers have come as somewhat of a surprise and haven’t been seen since the halcyon days of 2010.
These buyers are being drawn to the central location with access to the City and revamped Westfield Belconnen, excellent public transport and schooling options, ready access to local shops and value for money – with most buyers telling us they also like the larger block sizes compared with what they have considered in Gungahlin.
For many buyers, it’s important to bear in mind that prices don’t remain flat or falling forever, and even since the last period of flat growth in 2008, the median house price in the ACT has increased by around 15%.
So it’s not all bad news. Whilst market sentiment remains mixed, supply side pressures remain and the potential Greek default has the potential to create a global recession similar to what was witnessed in 2008, if history is any guide the Canberra property market will be OK.
We continue to suggest buyers act to capitalise on the improved buying conditions, and for homeowners in general we suggest caution in forecasting for capital growth.
However if you are a homeowner in the Belconnen market you can take some comfort from the activity level of the weekend and continuing strong buyer demand.