Canberra's housing market is falling hard and fast, according to new data which has revealed the capital's median house price has taken a plunge from its peak, but the decline may not last long.
The Domain House Price Report for the March quarter, released on Thursday, revealed the capital's median house price was $1,047,112, down 2.5 per cent over the quarter and 8.4 per cent year-on-year - making it the second most expensive city after Sydney.
But the city's median is far from its peak price which was achieved in the June 2022 period. According to the data, the current median has fallen by 10.9 per cent since then, a $127,472 drop.
"I'd say Canberra is now our weakest capital city in terms of pricing," said Domain chief of research and economics Dr Nicola Powell.
"I think we have seen prices pull back quite hard and steep in Canberra and the city is now the furthest from its own price peak than any other capital city. Even when you look at Sydney, from peak to trough, it's only fallen by 8.4 per cent."
Powell gave three reasons for Canberra's fall from grace.
"Canberra is a higher priced market, which means that borrowing capacity took a hit when the cash rate increased," she said.
"The capital also saw one of the strongest upswings in price during the pandemic - just after Hobart. The level of growth we saw in Canberra house prices surpassed that of Sydney and Melbourne, which is quite unusual."
While prices have pulled back, it's a small move compared to the price surge Canberra experienced during the peak of COVID-19. The capital's median house price increased by 51 per cent, or $396,846.
"Thirdly, we've seen a change in population. Interstate migration is now going into [the] negative so I think that change and a shift in population dynamics in the ACT, in particular, can have an impact overall on price cycles," Powell said.
"Domain analysis found population growth has a cumulative longer-term effect on house prices and, therefore, will continue to play a driving role in our housing markets into 2024."
Meanwhile, when looking at the unit market, Canberra recorded a median price of $579,094, up 0.9 per cent over the quarter and up 0.5 per cent year-on-year. They are now 5.2 per cent below the June 2022 peak, down by about $32,000.
Despite falling prices, Canberra resident Rushabh Shah and his family were house-hunting for about six months before they decided to ditch an existing dwelling for a new build.
"We were living in an apartment at the time and wanted a four-bedroom house within our kids' school catchment zones," he said. "We went to a lot of open homes on the weekends and tried bidding at three different auctions but were unlucky.
"It's a little bit stressful and the houses we were looking at needed some work and then we just thought it'd be better if we just built a new house."
A number of consecutive rate rises since May last year meant Shah's borrowing capacity was capped further.
"When we first started looking, our borrowing capacity was high but then with the interest rate rises, our borrowing capacity reduced even further," he said.
"We wanted something less than $1 million but when we were looking for a house, it was very rare to find anything less than that in the Gungahlin region ... but a new build was within our budget and what we wanted."
While Canberra's median is now sitting at seven figures, Powell said it was possible for it to drop below pre-pandemic levels, when the median was just under $800,000.
"I think we've already seen a substantial pullback in price and for it to dip below $1 million, we're going to have to see another 4.5 per cent shave from the current median," she said.
"While that could be likely, I don't think it'll occur. I think what we're likely to see is, yes, we have seen an acceleration of falls in Canberra's house price but I think the city is trying to find that floor in price ... we'll see more stabilised conditions towards the end of this year."
Real estate agent Josh Wilson of Luton Properties Weston Creek and Molonglo Valley recently upsized and is now in the process of selling his own home. Speaking of his experience, he said the buying and selling processes were different for everybody.
"When we bought, there were three registered bidders and it was still a very competitive nature but the main driver for us was wanting more space," Wilson said.
"And now that we're selling, we had about 21 groups through the first open home which we're really happy about ... I'd put that down to presenting the home as best as we could. I'm hopeful about the sale."
Wilson said while the market had "definitely softened", there were still buyers out and about.
"There are still some really good sales across Canberra from Forde to Red Hill, where sales of $6 million have been made," he said. "It tells me that people are prepared to meet the market and good prices can be achieved if a home is well-presented.
"I'd say it's a good time to upsize because the more expensive properties have pulled back a little further in terms of price while the lower-priced properties have held their ground."
