2017 was a big year for Canberra. Light rail construction was in full swing, our first tram arrived and who could ever forget Lonely Planet naming our great city the third best in the world.
It was a big year for Canberra property, too. With the median house price surpassing $700,000 for the first time and approximately 37 suburb records broken (source: Allhomes), 2017 saw Canberra sitting near the top of the highest growing capital cities in Australia.
But what does this all mean? And where is the market heading in 2018? We sat down with John Minns, Chief Operations Officer of Independent Property Group and Hannah Gill, Managing Director of Independent Property Management, to find out.
We know it was a big year for the property market in Canberra. How did it play out for Independent Property Group?
John – The Independent sales team sold 1,998 homes over the 12 months – more than $1 billion worth of property in the ACT region. Putting that in context, that’s a 14% increase from 2016. The numbers tell a pretty good story of consumer confidence and opportunity.
More importantly for our clients though, we saw high auction clearance rates of 78% at an average of $31,113 over reserve. Compared to the 2016 clearance rate of 75%, that’s a great result. 94% of listed properties were sold, which shows it was a confident market for buyers and sellers.
Hannah – 2017 was a tight year for the rental market, we had over 4,600 visitors to our rental exhibitions and an average vacancy rate of 0.37%. This was good news for our landlords, who were able to lease properties quickly with less time between tenants. However, people looking for a rental property were faced with a pretty tough market.
So, it was a strong year, with consumers responding positively?
John – Yes, very positively. We held 5,938 open homes with 23,046 visitors. When you compare that to 2016 where we had 16,376 – there were a lot of people looking for properties in 2017.
2017 finished strongly with the overall number of advertised homes increasing by over 12% between February and November.
Hannah – It was a strong year; we signed 1,614 leases – 227 more than 2016. Our average rent increased throughout the year too, from $421 in January to $435 in December.
Sounds like a momentous year, but there must have been some less positive aspects to 2017 – what were they?
John – There are two that stand out for me and they are inseparably linked: housing affordability and an undersupplied property market.
Even with such a strong finish to 2017 as far as homes for sale, there’s still an issue with supply?
Affordability and supply were both issues that we were very vocal about during 2017. So while there was an increase in supply, it started from a very low base of just over 1,300 properties (source: Allhomes), where a balanced market is probably closer to 1,800 advertised each week. And this is where affordability comes under pressure. Less choice maintains upward pressure on prices, and when this crosses over with monopoly land supply in the ACT, high block prices and planning laws designed to restrict suburban rejuvenation, we need to be looking at solutions that are holistic, not reactive.
And how about the rental market Hannah?
Hannah – I agree with John. Housing affordability and supply were two big issues that flowed on from sales and affected the rental market.
It’s not necessarily a shortage of housing supply but rather a lack of diversity in the mix of properties available. There was no shortage of apartments, but what we found this year were very little options for houses of varied location, quality/age and price. We need to meet the growing demand for increasingly varied tenant demographics, such as families looking to rent in certain school zones, or shared houses for students close to universities.
There were plenty of apartments to hit the market this year, but with more first home buyers in the mix, there was less overall investment stock available for rent. This resulted in less rental opportunities in new developments, creating the competitive, tight market.
It seems housing affordability and supply has been a big topic for quite a while – do you think we will continue to hear about it in 2018?
John – As much as I hate to say it, this conversation will continue. We saw wonderful examples in 2017 of first home buyers who committed to saving a deposit and beginning their first step to home ownership. Despite the naysayers, this is as possible now as it has been for the last 30 years.
I think the risk continues to lie with the limited housing supply and the impact it has had on the other end of the market: the empty nesters and the retirees. Far too high a percentage of this group continue to own older houses on larger blocks that they no longer have real use for. This needs to form more of the conversation this year.
Looking ahead, what do you think will be the big topics of 2018?
Hannah – I expect to hear more about businesses like Airbnb and the impact they will have on the industry. We’ve seen the damage this has done in places like Byron Bay, where long-term residents have been forced out of the rental market in place of short-term holiday rentals. While I don’t think Canberra will be affected to the same extent, it’s certainly something we’ll see more of. I’ll be interested to see if and how tenancy and strata legislation will be adapted and the impact this may have on tenants or landlords.
Like John, I expect housing supply and mix will continue to be a big topic in the rental market too, particularly when it comes to affordability and location of suitable housing for different tenant demographics.
John – For us in the industry, 2018 will be about technology and how it’s transforming the consumer experience. The evolving use of technology comes with a warning though;
There are well over 100 touchpoints in your average real estate transaction with 10-12 that are vitally important. People have too much to lose to put their faith in an algorithm that will not support them or take responsibility when the going gets tough. So, I expect that the high-tech but low-value programs will continue to fail.
We’ll see real estate businesses investing more in cutting edge technology to deliver higher quality communication, self-service options and faster results for consumers.
What do you hope for 2018?
John – My fervent hope would be that instead of paying lip service to urban renewal and redevelopment—particularly townhouse-style accommodation—to existing suburbs is that we actually do something. I’d like to see vibrant suburbs being built around existing infrastructure and reap the social, community and revenue rewards.
Let’s get rid of punitive lease variant charge development taxes and reduce them to a level that makes economic sense and encourages renewal. This is a real hope of mine, but with so many entrenched political and social positions standing in the way, I’m not holding my breath waiting for these positive outcomes just yet.
Hannah – To echo John’s comments, I feel now more than ever it’s important we see action on urban renewal and more contemporary, flexible planning rules, allowing Canberra to continue to evolve and meet the needs of its community and residents.
Legislation also needs to be reviewed to recognise changing industry needs, particularly around use of technology in property management practices. I just hope the industry is called upon to provide guidance and input for any considered changes—last year Victoria saw significant change to their legislation without industry consultation, and as you can imagine, a lot of stakeholders were left unhappy and worse off. I’d hope that with input from the industry, the ACT can evolve its legislation to find fair solutions that are beneficial for all parties.
Finally, any further predictions for 2018?
John – We’ll see Canberra region housing prices increase. In 2017, Canberra placed 3rd in the country, and this is likely to continue as the overheated market in Sydney continues to cool and people look to our city for more suitable opportunities.
Any market changes that increase supply or affordable options will keep this price increase reasonable, however as we have discussed, if affordable supply dries up any further, the result could be significant price growth. This will be great for sellers in the short term, but I would love to see a more balanced market over the next 12 months.