Canberra property: Are low interest rates driving the unit market?

Canberra can be relatively reactive to federal government events and decisions. Considering it has been an election year the property market has weathered the storm as house prices continue to make strong gains. Housing activity levels have been subdued despite interest rates being at historically low levels. If rates were higher, buyer and seller activity across Canberra would have suffered to a greater degree.

The unit market has bucked this trend. Over the first eight months of the year demand for units increased by a staggering 17 per cent compared to the same period the year prior, to 887 units sold. Historically low interest rates have activated this market sector. There is no doubt Canberra is going through a building transition but buyers are responding and absorbing more stock.

The latest building figures released by the Australian Bureau of Statistics have soared by 16.5 per cent compared to last year. There were 1827 units approved over the first seven months of the year. This is the second highest approval rate on record.

The building record was set back in 2011 when 2165 units were approved during the first seven months of the year. Since then approval rates have been at the highest levels seen since records began. It is this soaring building rate that has flooded the unit market. Based on Allhomes’ data 1392 units were listed for sale during the first eight months of this year, annually increasing by 9.3 per cent.

It is this increasing supply and copious stock on the market that has pushed unit prices down. The median sale price for a unit currently sits at $360,000, declining across the year by 1.7 per cent.

Buyers are being quick to snap up units. The rate to sale has declined by 2 weeks compared to last year, spending on average 117 days on allhomes.com.au, from the time listed to the time marked sold. It may be a surprise that the time spent on market is declining considering the supply levels have grown, but it appears the market has responded and is snapping up more units than last year.

As house prices make strong gains some buyers may be looking to the unit market for a more affordable alternative. However, Canberra does have a strong rental market, and given interest rates are at all-time lows it is plausible to assume low rates have activated unit investor activity.

Nicola Powell is a property expert for Allhomes. Twitter: @DocNicolaPowell. The MIX106.3 Real Estate Show, Saturdays 9-10am.