Hockey: Sell Canberra housing

ScreenHunter_01 Jun. 02 20.31

By Leith van Onselen

Last month, I asked whether it was time to sell Canberra housing, based on the Coalition’s pledge to axe 12,000 public servants from the Federal bureaucracy, as well as the potential oversupply of homes stemming from the recent surge in apartment construction.

On Friday, Shadow Treasurer, Joe Hockey, also suggested that now might be a good time to sell Canberra housing, noting that home prices could be pushed lower by a Coalition Government. From the Canberra Times:

Joe Hockey suggests house prices in Canberra could be pushed lower under a Coalition government.

“There is a golden rule for real estate in Canberra – you buy Liberal and you sell Labor,” he said on Friday morning.

He did not specify that this result would be due to cuts to the public sector that are being promised by Opposition leader Tony Abbott if he wins the September election.

However, house prices in the territory dipped when John Howard made big cuts to the public service in his first term of government.

Indeed, as noted last month, Canberra dwelling values took a battering during the Howard Government’s first term, falling by 7% over two years on the back of the lower employment and confidence (see next chart).

ScreenHunter_09 May. 17 10.41

The headwinds facing Canberra home prices are also likely to stiffen under changes to the First Home Owners’ Grant (FHOG) announced over the weekend. Under these changes, which mirror those implemented or announced in New South Wales, Queensland, Victoria, and Tasmania, the $7,000 grant currently on offer to first time buyers of pre-existing dwellings will be cancelled in favour of a $12,500 grant to purchasers of newly constructed or “substantially renovated” homes:

ACT Treasurer Andrew Barr said that the change was designed to help new home buyers and to assist the residential construction industry.

”We are seeking to boost demand for new housing and that keeps the construction sector strong and provides ongoing confidence,” Mr Barr said…

Mr Barr said the higher ACT grant would help local builders compete for first-time home buyers who might consider building in nearby NSW.

At present, only about 30 per cent of First Home Owner Grant recipients spend the money on new properties.

”If that money is chasing existing housing stock then all you’re doing is pushing prices up,” Mr Barr said.

”So what we’re trying to do here is to have that money assist first home owners, but chase new housing so that it provides a boost to the construction sector.”

While construction of apartments, in particular, in Canberra has been strong:

ScreenHunter_19 Apr. 17 20.33

Recent approvals data has weakened materially, signalling a sharp slowdown in construction:

ScreenHunter_02 Jun. 02 20.54

The move by the ACT Government to shift the FHOG to new dwellings should, therefore, help to keep dwelling construction elevated, which should act to dampen home prices, via both increased supply as well as lower overall first home buyer demand.

Again, it looks like a bad time to be a home owner in Canberra, with the public sector facing sharp cuts to employment just as increasing supply is coming online.

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Unconventional Economist
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Comments

  1. Knowledge of what happened last time seems to be bringing forward some supply and deferring some demand.

      • The Patrician

        Thanks Cap

        Have you got any data on annual ACT new dwelling sales or all dwelling sales?

    • Alex Heyworth

      Leith, Can we get an analysis on the new land tax implementation in the ACT?

      Nothing to analyse as yet. No details have been announced.

  2. I’m standing ready to jump in towards the end of the year… if I still have a job that is…

    The rental market is absolutely sickly around here. Two weeks free rent for a one year lease, stuff like that. My lease finishes around the time Tony crashes the party so I might have to renegotiate.

    • arescarti42MEMBER

      The rental market in Canberra is just astonishing at the moment.

      My lease finished a week ago. The place I was renting at $520/week is now being advertised at $450/week.

      One of the places I looked at was being rented at $390/week, advertised at $380, I offered them $330 (they declined) and it’s now advertised at $300/week with a week free rent.

      The place I ended up getting was discounted by $50/week from the previous tenant.

      Having watched super low vacancies, rising rents and packed open homes over the last few years, massive reductions seem totally surreal.

      • I just signed a lease for a $300 place with effectively a free week. It was $350 the week before and high 300s before that — could be the same place (convenient as anything but old, cold, and lots of proximate public housing). When it was on the market previously it rented for high 300s. Oddly Campbell units are holding their asking prices despite the supply

      • I agree. I’m just shedding crocodile tears for the poor old “investors” out there.

  3. The Householder

    Contrast the sympathy Abbott and Hockey have for Ford workers losing their jobs to their sentiments towards the public service.

  4. thomickersMEMBER

    Kevin Rudd put his Canberra property on the market…he has listed it higher than what he paid for in 2010.

  5. The Patrician

    “Real Estate Institute of the ACT president Michael Kumm said the decision to boost the grant was ”an extremely positive step for the ACT government to take”.”

    That is a refreshingly positive attitude from the REA’s

    and hot off twitter from the Treasurer

    “Andrew Barr ‏@ABarrMLA 21m @HousingStressed @pirate_taco @emmadavidsonACT The Government will be releasing land for 4,800 new dwellings in 2013-14. #Majorsupplyboost.”