The factors affecting Canberra’s apartment market

The factors affecting Canberra’s apartment market

Posted on Thursday, August 23 2012 at 9:41 AM

New apartment oversupply in Canberra’s inner north and south should tighten due to lack of new development applications, however in the lead up to the Australian Capital Territory (ACT) election the Liberal Party’s proposed cuts to 15,000 jobs isn’t exactly putting the spring back into the investor’s step, according to Gordon Yeatman of Propell National Valuers.

The new apartment oversupply
problem that inner Canberra suburbs are facing stems back to a couple of years
ago, when the ACT Government proposed an increase to the developer’s tax by a
specific date, says Jeremy Francis of PRDnationwide Inner North Canberra.

“Its effect on the market at the
time was an unknown quantity,” he says.

He adds that at the time the
information being bandied about was that the original developer or ‘betterment
tax’ of $1200 per unit would increase by 10 times this figure to become the
‘change of use charge’.

“So developers rushed to their
architects and ACT Planning (ACTPLA) to submit development applications before
the changeover date and what resulted was a large supply of new units in the
market.

“Because of the rush back then,
architects are now twiddling their thumbs and ACTPLA is like a ghost town.”

Francis says what the ACT
Government has done is impact the market to the point that a large supply of
units approved two or so years ago are coming to market at the same time,
leading to a short-term oversupply, however beyond that, supply appears to be
nil, which is good news for the unit investor.

What this means is that the
downward pressure on rents and values in new units won’t be sustained long
term, he says.

The inner north and inner south
suburbs currently experiencing a short-term oversupply of units include
Braddon, Barton, Kingston, Dickson, O’Connor, Turner and Griffith, says
Francis.

“New unit rents and values in
these areas should tighten up again over spring and summer as workers are
transferred in and out of Canberra.

“Historically 40 per cent of
Canberra property sells in the spring market.”

However Yeatman believes it’s
likely to be a longer wait for investors, beyond the imminent ACT election due
to the job cuts being proposed by the ACT Liberals.

“We’re not out of the woods yet and when the Opposition
Party is promising to axe 15,000 jobs if it wins the election this doesn’t help
provide confidence in the Canberra property market.

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