Sharp boost to Canberra property values in February as demand pressure continues at the lower end of the market

Canberra’s property market surged in February, posting one of its steepest monthly jumps in years as buyers returned after the festive-new year holiday lull.

The Cotality Home Value Index, released on Monday, shows Canberra values last month rose by 0.8% across all dwelling types, netting a 6.2% boost to property prices in the past year.

The Cotality report shows that Sydney and Melbourne values flatlined in February with zero growth, while mid-sized capitals like Perth, Brisbane, Adelaide and Hobart were in the strongest position with price growth of at least 1% for the month.

In Canberra, the median dwelling price is now $903,374, while the median house price is $1,051,977.

Windrose Property Principal and Sales Agent Sam McGregor said the Home Guarantee Scheme was continuing to drive sales at the lower end of the market in line with the initiative’s $1 million cap.

“0.8% growth for the month of February is very significant and shows that the market in Canberra is strong and people have a lot of confidence at the moment. It’s positive news,” Sam said.

“First homebuyers are big drivers of the market at the moment and the average dwelling value is a touch over $900,000, which is well within the ballpark for the Home Guarantee Scheme eligibility.

“The government policy for first homebuyers is putting a lot of pressure on the lower end of the market. The upper end of the market – that $1.2 million to $1.3 million bracket – is not as crazy with significant upward pressure.

“At the end of the day, February has been quite competitive because traditionally, it’s a competitive time of the year. Now there’s added incentive to buy homes between $800,000 and $1 million at the moment and the market is looking like good value.”

Under the Federal Government’s Home Guarantee Scheme, buyers can make a purchase with 5% deposit with the government acting as guarantor and contributing the remaining 15% of a deposit, avoiding costly lenders mortgage insurance. In addition, the price threshold has increased to $1 million for first homebuyers.

Cotality Research Director Tim Lawless said the more affordable end of the market was still delivering some strength.

“There is a lot of competition for lower-priced properties,” Tim said.

“First home buyers, investors and subsequent buyers are all competing across this sector of the market, while credit is less available across the higher price points due to serviceability constraints.”

Sam said speculation over further interest rate hikes had some sectors of the market on tenterhooks, but genuine buyers were still very much in the mix.

“Interest rate increases have impacted borrowing capacity for people but I don’t think it’s taken anyone out of the market. People seem to be a little more conservative in what they are willing to spend or are able to spend,” he said.

“I’m hearing that a fair bit at the moment. Looking forward, the next conversation will be people not wanting to overstretch themselves because inflation is still quite high, which means that the Reserve Bank of Australia might still keep pushing rates.

“It’s a double-edged sword. It shows that the market is strong, but to respond to a strong market the RBA will likely put pressure on people’s borrowing capacities.”