Adjusted expectations see buyers to turn to unit market
Nationally, property prices are experiencing robust growth. Data from CoreLogic found values of Canberra houses increased by 2.1% and unit values increased by 1.2% during April.
Media were slow to start covering the apartment market favourably. However, as values are climbing nationally, analysts and property market commentators have started rushing to share their opinions on the next best investment opportunity.
In Canberra, the speed values are increasing by is forcing some buyers to rapidly adjust their expectations or find themselves left behind by the market. During the second half of 2020, this compromise was seen when buyers who could not find suitable houses adjusted their expectations and bought a townhouse. Now, due to an extreme shortage of quality townhouses available on the market, there is a rapidly growing cohort of buyers considering apartments.
Increasing demand is catching some buyers off-guard as they find by taking their time to make decisions, they risk sales milestones being achieved, triggering price increases. CoreLogic data found Canberra units had an annual increase in value of 7.6% giving confidence to developers to increase prices.
Prospective buyers researching the market can find it difficult to distinguish between credible sources like CoreLogic and Domain that genuinely understand the market and have data-backed insights, and ‘advisors’ who appear to act as a buyer’s agent but usually focus on how many parts of the transaction they can ‘clip the ticket’ on. Often, they receive fees of more than 5% of purchase price, plus receive referral fees, or have in-house teams for a package of associated services including conveyancing, property management and mortgage broking.
Supply in Canberra is often misunderstood as the delivery mechanism for apartments is time consuming and slow. It often takes over 24 months from the time when pre-sales commence to a project settling. In an area it may appear as though there is a lot of competition, however, if you break each project down to its stage of delivery, it is uncommon to see multiple projects at the same stage of construction. This could explain why rents are high and the rental vacancy rate is persistently low in Canberra.
Buyers wanting to future-proof their property and avoid high transaction costs might use delivery timeframes to improve their financial circumstances. This could include saving a bigger deposit or securing more favourable employment in the time between when they exchange contracts and when they settle. For some, this is a huge advantage over buying an established property which requires purchasers to be ready to settle within 30-60 days.
Editor’s note: Sam Dodimead is the listing agent for a number of developments where off-plan purchases can be made.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward delivery of new buildings. Stream from wherever you listen to podcasts.
Read last week’s market wrap here.
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