How the ACT budget will affect the Canberra property market

The ACT budget was delivered this month and included a number of changes that will affect the property market. Allhomes takes a look at the key factors that will impact homeowners, investors, tenants and potential buyers.

Rates

Owners of detached homes can welcome a slowdown in rising rates from July.

The 9 per cent average annual rise drops to 4.5 per cent in the coming financial year, however it will again lift to an annual 7 per cent rise from 2017-18.

Apartment owners will be harder hit, facing a 20 per cent rise in rates from July next year. This percentage equates to an average of $230. It will fall to a 15 per cent rise the following year, or an average of $200.

Chief Minister Andrew Barr says the changes were “correcting an imbalance” as the current unit rates did not reflect the property’s market value.

However, while the percentage figure may appear to be a substantial figure, experts believe the dollar amount, which equates to about $4 a week, is unlikely to deter buyers.

“Considering the financial outlay impacts household budget following the purchase of a property, it is unlikely to be a major factor turning buyers away from the market,” Allhomes data analyst Nicola Powell says.

“The impact on individual rate bills is dependent upon on the property value, and the increase to rates will also vary depending upon market performance. The astute buyer will certainly keep this in mind.”

Powell says rental conditions have tightened in recent months, which has given investors room to pass these rate rises on to tenants.

“The market appears to have absorbed the surplus supply of units and apartments,” Powell says.

“This year has seen a substantial reduction annually in the number of new properties to hit the market. Shrinking stock levels and a relatively consistent demand level has created the perfect conditions for price hikes.”

Stamp duty

There was good news for buyers with stamp duty cuts for both residential and commercial property.

Cuts to residential stamp duty were effective immediately. The stamp duty on a $500,000 house has been slashed $1100 to $13,500. That figure will continue to drop over the coming years to $10,000 in 2021-22.

“Considering the nature of stamp duty, a lump sum to be paid upfront when purchasing a home, any changes to the duty impacts first home buyers the most.” Powell says.

“In the current economic environment, it is not necessarily the affordability of mortgage repayments that are the challenge for first home buyers, it is saving the hefty lump sum recommended for a deposit and other associated upfront costs.”

More first home buyers will also be exempt from paying stamp duty with the threshold lifting from $442,500 to $455,000 for transactions on new homes until the end of the year.

Luton Properties head of project marketing Slade Minson says the lift is largely in response to inflation, however it is still good news for the property market.

“So often we see governments introduce a concession or assistance scheme, but the value is vastly eroded over time,” Minson says.

The stamp duty on commercial property up to $1.5 million will be halved in 2017-18 and abolished the year after. Read more about commercial stamp duty changes on page …

Labor began a 20-year phase out of stamp duty five years ago and an increase in rates was introduced to make up the lost income.

“If stamp duty is eventually completely abolished it could negatively impact first time buyers accessing this scheme, putting them on a level playing field to other purchasers who would have been paying stamp duty,” Powell says.

“Under current conditions, for first time buyers who do not meet the criteria of the home buyer concession scheme, falling stamp duty would certainly aid affordability of the initial cost of purchasing.”

Land releases

The ACT government will exceed its annual target of land release, with revenue expected to hit $597,164,000 – almost $40 million more than budgeted a year ago.

About $630 million of revenue is projected for the next financial year and will include 131,404 square metres of non-urban community land, 4500 residential dwelling sites, 12,811 square metres of commercial land and 30,000 square metres of industrial land.

New residential releases will include the Canberra Brickworks site in Yarralumla and detached housing sites in Throsby, Taylor and the first stage of West Belconnen.

“Those buyers struggling to get into the market will welcome the boost of single residential blocks,” Powell says.

“There have been concerns that the slow release of land has elevated prices achieved at auction, as buyers fiercely compete.”

Powell says the increased land release will help to ease price growth.

Minson believes demand for land in Canberra will continue to outstrip supply, which is disappointing for buyers, but welcome news for those who already own property in the ACT.

“While we have an inadequate supply of land, we’ll see land prices stay where they are, which is well above reserve,” Minson says.

“Land selling at around $900 per square metre has become pretty expected and it’s why we’re seeing people looking across the border.

“But people invested in property do have an interest in land prices not deteriorating across the city. If the price of land halves it will affect the value of property across the ACT.”

Infrastructure

The budget included more than $100 million for road duplication works and $17 million for new public transport initiatives such as 20 new buses, a new city bus loop and a direct service to Weston Creek. The light rail will advance, however the only new funding initiative in the budget was a $500,000 business partnership program.

Minson says infrastructure improvements are good for the property sector. “Generally speaking, when we see an improvement in infrastructure, we see a rise in property value.”

He says he expects to see a rise in property value in the light rail corridor as the project begins to take shape. 

“Flemington Road may be a little slower because there are a lot of apartments along there, but watching the Northbourne corridor evolve is something everyone in Canberra should be excited about,” Minson says.

Public housing

A record $393 million has been budgeted for the government’s public housing renewal program, with $192 million allocated for the next financial year alone. Northbourne Flats, Currong Apartments, Stuart Flats, Bega Court, Strathgordon Court and the Lyneham Flats are among the properties to be redeveloped, while new properties are slated for various locations across the ACT.

Affordable housing peak body ACT Shelter has welcomed the announcement.

“We know tenants will benefit from being allocated newer homes that are energy efficient,” ACT Shelter executive officer Travis Gilbert says.

“Key benefits being improved health and wellbeing and lower utilities costs.”

Mr Gilbert says the organisation would also like to see new affordable housing and private rental assistance for those leaving violent situations. He says some families who struggle with high housing costs earn too much to be eligible for social housing, but not enough to meet their needs in Canberra’s current housing market.

Stylish edge revealed

15b Faunce Crescent, O’Connor
$900,000-plus

Behind its understated facade, this architecturally designed home features an open-plan design and a lovely sense of light and space.

The ground floor boasts 5.4-metre ceilings and full-height windows. Striking inclusions such as pendant lighting, plywood ceilings and a feature staircase give the home a stylish, eclectic edge.

A designer kitchen at the heart of the home features a Miele electric oven, induction cooktop and semi-integrated dishwasher. It also includes a large island bench and ample storage.

Three alfresco areas provide the ideal setting for entertaining.

One of the bedrooms is segregated downstairs and the other two are on the upper floor. The master suite includes a walk-through wardrobe that leads the way to the main bathroom. It is well equipped with a bathtub, double shower and a heated floor.

Year-round comfort is provided by a gas fireplace in the living room, as well as zoned in-slab heating.

Other features include bamboo flooring, LED downlights, a low-noise, industrial-sized ceiling fan, a 5000-litre rainwater tank and an infinity hot water system.

The home has dual driveways and is set within walking distance to the O’Connor shops, the ANU, public transport, the CBD and Braddon. 

No.15b Faunce Crescent, O’Connor is for sale by negotiation through McGrath Dickson agent Maree van Arkel. Phone 0419 624 766. Inspect: Saturday, 10.30am-11am. EER: 5.5.