Competitive first homebuyers fuel pre-Christmas rush in Canberra

Strong demand among first homebuyers is driving serious competition for freestanding houses priced between $800,000 to $1 million, as buyers try to lock down deals before Christmas with new government incentives.

Windrose Property Principal and Sales Agent Sam McGregor said the lower deposits and higher price caps available under the Home Deposit Guarantee had continued to fuel the market in November, staving off any end-of-year slowdown.

“The numbers are strong and show there’s a lot of competition in the market, which we can expect to continue into the new year,” Sam said.

The Cotality Home Value Index, released this week, shows dwelling prices across Canberra rose by 2.2% for the spring quarter, with a 1.0% boost in November alone.

But freestanding houses were the clear winner for the month, sustaining 1.3% growth, while units and apartments dipped slightly by 0.1%.

The median house price in Canberra is now just over $1.035 million and units are $598,784.

Under the guarantee, which came into effect in October, first homebuyers can access 5% deposits and no longer need to take out costly lenders’ mortgage insurance. Higher price caps have also been imposed.

In the ACT, the property price cap of $750,000 has increased to $1 million. Other states have different thresholds. In NSW, the cap is now $1.5 million for the capital city and regional centres, and $800,000 for other areas.

“We’ve had a really strong spring and it’s going to continue,” Sam said. “This government policy has really driven competition for freestanding homes, so there probably hasn’t been a better time to buy or sell a house in that price bracket than now.

“The bracket between $900,000 and $1 million is the most competitive and has the highest price pressure on it at the moment.

“When your average price for a house is sitting a touch above that $1 million bracket, it shows that the competition really is right around the million dollar mark. Two or three months ago we forecast that this would happen, and now we are seeing that prediction translate.”

Sam said the Reserve Bank of Australia’s recent indication that inflation was still too high had given buyers greater motivation to secure a new home before Christmas and avert any potential rate rises.

“The RBA has said inflation is a little high so there’s talk that interest rates won’t be coming down any more. That’s another driver for competition. People are saying: ‘It’s not going to get any cheaper, so we might as well jump on board now and get a deal done’.”

The Cotality report found that while there was no firm data on the uptake of government programs, it’s clear that prices are rising more rapidly across lower price points where first homebuyer demand is most concentrated.

Cotality Research Director Tim Lawless said the RBA’s caution around inflation and its effect on interest rates could impact future housing growth.
“With inflation once again above the RBA’s target range and rates potentially on hold for the foreseeable future, it’s likely housing sentiment will suffer,” Tim said.

“We can already see the flow through effect from such stretched affordability and serviceability measures, with growth in housing values skewed towards lower price points of the market.

“Although these demand-side policies help to temporarily boost home ownership, they do nothing to address housing affordability in the long run,” he said.