One of the advantages of actively working in the market is hearing buyer feedback directly. Being connected provides an opportunity to listen and understand what perceptions are on the ground. As a national anomaly, strong market performance in Canberra is playing tricks on unsophisticated participants. So much so, by perceiving the wrong market risks they could end up being crushed by compounding month-on-month growth.
Sales results for housing exemplify the state of the market. In most areas there are far fewer opportunities to choose from with a pool of buyers who have significantly greater firepower to pay higher prices created by exceptionally low borrowing costs. Auction results by Domain show Canberra had the strongest capital city performance nationally during August, achieving an average clearance rate of 78.8%.
Median auction price can be an early indicator of where the market perceives prices heading. The median on Saturday 29 August was $1,035,000. This shows buyers have adjusted their price expectations upward and are likely frustrated by a lack of buying opportunities; especially as interstate and overseas migration remains limited, causing people to stay in their homes for longer.
In the off-plan market, lack of stock combined with significant demand from people seeking to receive the HomeBuilder Grant and stamp duty concessions or discounts has seen sales volume increase over the last 60 days. For the last year, I have noticed investors had opted to be passive market participants, however, have reasserted themselves during the last couple of weeks.
Low cost debt combined with high rental yield, low vacancy rates and the comfort of seeing values of their homes increase have helped investors be confident in acting now. Greater depth in the pool of buyers seeking off-plan properties is great for property developers and agents, however, creates challenges for first home buyers, especially those with any uncertainty as opportunities evaporate around them.
I have found a large proportion of buyers choosing to sit on the sidelines are doing so because they are genuinely confused rather than from having any concern about their circumstances now or into the future. National media have played a leading role exacerbating their confusion by choosing to circulate fear from promoting wildly inaccurate forecasts of the property market in Canberra.
Ironically, favourable market conditions allow buyers to feel comfortable choosing to sit on the sidelines. When choice is removed by genuinely undesirable economic conditions, there are few buyers with both the resources and internal fortitude to make confident decisions.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward deliver of new buildings. Stream from wherever you listen to podcasts.
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