General sentiment is that property markets will gain new impetus once this weekend’s election is out of the way. But the big exception will be Canberra.
Elections should not matter to property investors, as the fundamentals underlying investment change little. The strange habit businesses and individuals have of delaying decision-making until the outcome is known, as if election results are game-changers, never makes much sense.
Recently-published research on the pattern of market activity and price growth before and after elections shows there is no pattern. Prices have stalled before some elections in the past, while there has been strong growth in the lead-up to other polls.
This year we have seen solid growth in many markets, in defiance of the popular view that prices stagnant when elections are called.
Regardless of who wins Saturday’s contest, Australia has a fundamentally solid economy, low unemployment and attractive interest rates. Nothing will be different next week.
The investment plan I have this week will be the same one I’m implementing next week.
The only difference will be in sentiment. Consumer confidence tends to lift when there is a change of government, as appears likely.
That won’t be the case in the ACT, however. Stand by for some earth-quaking changes.
It’s pretty clear whoever wins will put the cleaners through the federal public service, particularly if we have a Tony Abbott-led government on Monday morning.
Canberra generally has the most consistent city market in Australia. It often has the lowest unemployment and the highest average incomes in the land. That provides a solid under-pinning for property markets.
Currently, the ACT unemployment rate is 3.6%, well below the national average of 5.7% and easily the lowest among the states and territories. And, over the past two years, wages have growth in the ACT considerably faster than the national average.
The Canberra market, overall, has returned to growth in 2013, in keeping with national trends. While its growth has been a little below average (3.8% in annual growth in dwelling values, compared 5.3% as the capital city average, according to the latest figures from RP Data) it has still been solid.
All that will change when a new federal government gives public service numbers a short back and sides. The main public sector union, the CPSU, says around 8,000 public service jobs will be lost under an Abbott government, removing $650 million annually from the Canberra economy. Documents published in the media indicate the Coalition initially plans to cut 6,000 positions, with more to come later.
This would replicate the actions of Liberal state governments as they have taken over in Victoria, New South Wales and, especially, in Queensland.
The Australia Institute think tank says the ACT is facing a recession as a result of Coalition reductions to the public service. It predicts between 6,000 and 12,000 jobs will be axed.
This week the ACT and Region Chamber of Commerce and Industry reported that business confidence in the future of the ACT economy was “in free fall”. Its survey found that most expect the economy to weaken, with employment levels and profits falling or, at best, stagnating.
Canberra, therefore, is a market to avoid. Prices are likely to fall.
Canberra's tenants might embrace nation-leading falls in asking rents but one expert says new quarterly figures reflect a deeper lack of confidence in the capital's market.
Data being released on Thursday shows median asking rents for houses in Canberra had dropped 3.6 per cent in the September quarter - or $17 a week - with unit rents down 1.7 per cent, the largest drop for both sectors of any capital city.
The quarterly shifts mean rents for the city's properties have dropped more heavily than any other capital city in the 12 months to September 30, and Australian Property Monitors' Andrew Wilson said the weakness reflects wider market concerns.
"I think we're just starting to see the signs of declines in house prices and rents as well," Dr Wilson said. "I do think there are perhaps underlying economic issues that are driving reduced demand for renting and for buying."
Dr Wilson said the Canberra property market had been the most volatile of any capital city in the past year, and while there was still heavy interest from first home buyers, the fears and reality of widespread public sector job cuts were hitting the local economy.
"Of all the markets, it was the Canberra housing market that seemed to be affected not just by the election campaign but by the issues involved in the election," he said.
"I guess it was a race to the bottom in terms of job cuts, and this has to have an effect - on sentiment and the actual job shedding."
Elections like the one we just had always shake up the Canberra market. It's not surprising that median rents are dropping in some places. Lots of people I know in Canberra are waiting to see what happens before making a firm decision re buying.
I suspect things will settle over the next 12 months. The big fear locally is that the govt will take to the public service, but information here on the ground is looking increasingly like really big cuts won't be happening any time soon. There's some token cuts, of course, but the new govt has made plenty of promises and needs resources to deliver these.
Canberra has increased a lot in the last few years, so I suspect we'll have a few leaner years before things hot up again. I expect Canberra property to double in nominal terms within 17 years (by 2030).
Canberra has increased a lot in the last few years, so I suspect we'll have a few leaner years before things hot up again. I expect Canberra property to double in nominal terms within 17 years (by 2030).
If you prove correct in that call Stinkbug, it surely doesn't sound to me like a market the neg gearers will be wise/keen to get into?
A Professional Demographer to an amateur demographer:"negative natural increase will never outweigh the positive net migration"
If you prove correct in that call Stinkbug, it surely doesn't sound to me like a market the neg gearers will be wise/keen to get into?
Dunno, I've never been a big NG supporter. To me NG is just a characteristic of an investment that makes early, shallow losses in order to have later, deeper gains. (EDIT: Anyone expecting big short term gains in Canberra is likely to be disappointed)
I'm quite happy if rents cover my costs, and allow me to purchase the properties outright over several decades. As they increase in value I can continue to rent them and/or borrow against them for the purchase of other assets.
Re the 17 prediction, I am strongly of the opinion that 2020-2030 will have a big economic surge for Australia, and that this will be enough for government revenues to increase, the size of the government to increase, and my IPs to grow accordingly. Based on the location of my IPs, I don't expect I'll need the Canberra median to double in order for my properties to double (from their current values).
Rents will fall because property prices went too high, too much greed basically and now it will re-adjust like it did in Brisbane. Rents in Brisbane have not hardly budged in years.
Rents will fall because property prices went too high, too much greed basically and now it will re-adjust like it did in Brisbane. Rents in Brisbane have not hardly budged in years.
Canberra went through the same thing in the second half of the 1990's. Then it went crazy when everyone realised how cheap it was.
I'm expecting the same to happen over the next decade and a half.
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