Canberra unit values rise as entry level buyers benefit from February’s dip in interest rates

Entry level buyers are taking advantage of lower interest rates, with units and apartments in Canberra outperforming houses in price growth.

The latest CoreLogic Hedonic Home Value Index, released on March 3, shows Canberra sustained a 0.2% rise in values across all dwelling types last month, but it was the unit and apartment market that emerged as the strongest performer.

Unit values grew by 0.9% in February to a median price of $589,329, while house values were static, remaining at a median of $963,146.

Windrose Property Principal and Licensed Agent Sam McGregor said after fluctuating values in recent months, 0.2% growth was a positive sign.

“0.2% is 0.2%. It’s not to write home about but it is growth all the same. It shows that there is confidence in the market,” Sam said.

“There’s been a definite shift in the Canberra region towards buying…There are more people out there looking to buy in the sub $750,000 bracket than there has been for 18 months.”

In mid-February, the Reserve Bank of Australia dropped interest rates for the first time in four years with a dip of 25 basis points to 4.1%. The cash rate had gradually risen from the historic low of 0.1% to a 13-year high of 4.35% in 13 rate increases.

Sam said the data showed the drop in interest rates, the time of year and general positive sentiment from buyers was flowing into the unit market before the house market.

He said the RBA’s decision to reduce rates had been expected so the market had seen an uplift in positive sentiment over the past six weeks.

“That’s not surprising because the price points we are talking about – around $600,000 for a unit verses $963,000 for a house – shows there is a lot of demand for people to buy. Units are looking affordable compared to house prices,” he said.

Sam expected the movement in interest rates would initially impact the more affordable end of the market and would likely flow onto more expensive price brackets during the year.

“The important point is that with strength in the unit market and the entry level home market, that traditionally might be seen as an indicator of the start of a new cycle,” he said.

“The money flows into entry levels home, which people sell to upgrade or because it’s an investment property. Then, more money flows into the middle bracket. This data shows that the money is there at the bottom end of the market.

“First homebuyers and people looking to get into the market are spending the money and that breeds longer term confidence.”

CoreLogic Research Director Tim Lawless said the improved housing conditions had more to do with improved sentiment than any immediate improvement in borrowing capacity.

“Expectations of lower interest rates, which solidified in February, look to be flowing through to improved buyer sentiment,” Tim said.

“Along with the modest rise in values, we have also seen an improvement in auction clearance rates (nationally), which have risen back to around long-run average levels across the major auction markets.”