Dual forces drive Canberra’s property market with new deposit guarantee and peak spring period

Canberra real estate is poised for a double boost, with the Federal Government’s fast-tracked Home Deposit Guarantee giving first homebuyers a leg-up during the traditional spring surge.

Windrose Property Principal and Sales Agent Sam McGregor said the extra policy support, which came into effect on October 1, combined with the peak spring season was the “perfect storm” – and set the scene for strong price growth in an ultra-competitive market.

“With the government’s changes to the Home Deposit Guarantee, coupled with spring, and it’s likely to be a manic run to the end of the year,” Sam said.

The Home Deposit Guarantee, which has been rolled out three months ahead of schedule, allows first homebuyers access to 5% deposits, instead of 20%, meaning they do not have to take out costly lenders’ mortgage insurance.

Under the scheme, the government acts as guarantor and contributes the additional 15%.

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.

Meanwhile, the Cotality Home Value Index, released on Wednesday, shows Canberra sustained strong property price growth in September with an increase of 0.7% – a day after the Reserve Bank of Australia decided to hold the cash rate at 3.6%.

The median dwelling value in Canberra is now $885,942.

“The current situation is the perfect storm to put pressure on prices,” Sam said. “It’s going to put significant upward pressure on homes between $750,000 and $1 million, which has already been a point of the market that has been under pressure.

“The growth we saw in September is likely because of some astute buyers who were keen to lock a deal down, knowing that in two or three months when prices take off, they will be happy they did.

“I’ve been saying for the past month if you’ve got a house that’s worth $850,000 now, it’s probably going to be worth $950,000 in about two months and I still believe that.”

September’s price growth and 1.7% over the last quarter, representing two months of winter and the first month of spring, is a significant outcome, Sam said.

“It’ll be a watch-and-wait to see how supply plays out over spring because it’s likely a lot of houses will come to market, but it’s also very likely supply still won’t match the demand given first homebuyers have just been opened up to afford the median house now,” he said.

“It’s an interesting fiscal policy because it lights a fire under demand and does absolutely nothing to address the supply issue. It almost has COVID-era vibes as to how much pressure it will put on the market.”

Cotality Research Director Tim Lawless said there would be higher levels of demand due to the Home Deposit Guarantee, with concentrations around the new price caps.

“Amid already scarce supply, prospective first homebuyers looking to utilise the deposit guarantee may be feeling anxious as competition among buyers picks up,” Tim said.

“We could see the value of houses in well-located areas, recently unlocked by the expanded caps, surpass those new price caps quite rapidly.”