Canberra property market slides as tax changes, uncertainty bite

Tax changes for investors, seasonal conditions and global uncertainty are continuing to weigh on Canberra’s property market, with housing values slipping again last month.

The latest Cotality Home Value Index, released on Monday, shows property prices in the ACT fell by 1% in July – the fourth consecutive month of declines. It signals a 2.1% drop for the quarter.

It comes as the Australian property downturn gathered sharp momentum with a national drop in values of 0.7% last month – the largest single-month decline since December 2022.

The report found buyer and seller expectations were shifting to reflect the rapidly evolving market, impacted by affordability and mortgage serviceability, three cash rate rises this year, tax changes, low consumer confidence and the conflict in Iran.

Windrose Property Principal and Sales Agent Sam McGregor said the status of Canberra’s housing market was a flow-on effect of government policy and tax changes for investors, as well as the seasonal impact of winter.

“My view is that investors are not a driver of strength in the market generally, but there’s a lot of conversation at the moment about the impact government policy has on investors,” Sam said.

“Changes to negative gearing and capital gains tax exemptions is a disincentive for investors to purchase property. The problem is when there’s policy instability, there’s market instability.”

The Cotality data shows Sydney suffered the greatest drop in values in July with a slump of 1.4% followed by Melbourne with a fall of 1.2%. Brisbane and Adelaide were the only other two capitals to venture into negative growth territory, albeit a lower rate.

Sam said, despite recent declines in values, Canberra’s market was still functional and faring better than Sydney and Melbourne, largely due to the employment stability of the public service.

“A 1% reduction in the last month, from a policy perspective, is driven by a lack of confidence in the market and that lack of confidence is coming because the government is not giving anyone any certainty on what the future is going to look like.”

Winter was also a contributor, Sam said, but that would soon pass with the peak spring selling season on the horizon.

“The reality is there’s not a lot of new listings that come to market in July, and there’s not a lot of new buyers who come into the market in July. On the ground, we will always see lower numbers in July compared to any other month of the year in terms of deals being done.”

Sam said declining housing values was unlikely to be an ongoing trend.

“It’s not a market that’s in the toilet. It’s definitely not flying high, but it’s still pretty strong all things considered,” he said.

“Anyone looking to sell knows they will meet the market in spring but are quietly optimistic, that coming out the other side of winter, there’s going to be a decent market.

“Buyers will have a lot of options in spring because there will be people who have waited to launch their homes. But you’re not going to be seeing 10% discounts. So, if you see the house that you like this spring, jump on it because if you don’t someone else will.

“We saw this 18 months ago when everyone was waiting for the market to drop, and then it didn’t. There were changes to government incentives for first homebuyers and that lit a fire under the market.

“The market has shown that no matter what goes on – wars in Iran, government housing tax policy changes, the depths of winter – it’s stayed pretty strong the whole time. It shows the resilience of the economy.”

The median dwelling value in Canberra is now $883,138. Houses are sitting at $1.025 million and apartments and units $594,894.