Restored housing market is here to stay in 2016

The restored market confidence seen during 2015, particularly towards the end of the year, appears to be here to stay. A strong February performance highlights that the housing market activity across the ACT and Queanbeyan continues to revive.

Buyers were out in force during February, snapping up 697 properties, an additional 49 compared to February 2015. Demand for all property types has improved. This boost in sales has made up for the year-on-year dip in buyer activity over the past two months, resulting in a marginal increase in sales during the February quarter.

Detached houses consistently make up the majority of sales each month and this continues to grow. The strong demand for detached family homes is a trend that remains from 2015. This has resulted in robust auction results and has helped to fuel house price growth. Median house prices have improved by 5.4 per cent over the year to reach $595,000. The supply of detached homes fell 4.4 per cent over the February 2016 quarter compared to last year. This will put additional pressure on prices growth.

Townhouses, units and apartments are gaining popularity. This has helped to push up median townhouse prices by 0.7 per cent from January to reach $431,000, improving 1.6 per cent over the year. Falling unit and apartment prices eased in February as median prices rose by 0.05 per cent from January to reach $385,000. The easing supply of new listings and increased demand has helped to steady the tumbling prices previously recorded. Price falls are still being recorded annually, which is down by 0.7 per cent.

The latest Adelaide Bank/Real Estate Institute of Australia Housing Affordability Report shows that affordability in the Territory has deteriorated over the December 2015 quarter. The average Canberra resident spends 19.9 per cent of the median household income on the average mortgage repayments, compared with only 19 per cent during the previous quarter. Recent mortgage rate hikes and month-on-month prices growth has not helped affordability levels. As stock levels fall it only highlights the need for additional detached house stock or quicker land release programs.

The Opposition’s proposal to limit negative gearing to new dwellings will put further pressure on affordability. The first home buyer grant is limited to new or substantially renovated properties, putting first home buyers and investors in direct competition for new housing.