Looking for value
Finding opportunities to extract value from Canberra’s property market has become an extremely difficult task. Prevailing market conditions have resulted in new suburb record sale prices multiple times per month and the auction clearance rate consistently above 80%. In these conditions, it is easy for buyers to think it is impossible to find value opportunities, however, I strongly disagree. The best value buying opportunities are not only hiding in plain sight, but they also exist in the most affordable part of the market.
The most obvious early indicators of where to find value opportunities entered our public domain on 17 April, when Treasurer Josh Frydenberg and Minister for Housing Michael Sukkar issued a joint media release identifying challenges faced within the construction industry.
“The Government’s decision to provide existing [HomeBuilder] applicants with an additional 12 months to commence construction responds to unanticipated delays in the construction industry caused by COVID-19-related supply constraints including delays in global supply chains and recent natural disasters.”
On the same day, Denita Wawn, CEO of Master Builders Australia said, “The scale of the HomeBuilder success – more than 120,000 HomeBuilder applications have created huge pressure on the supply chain with Master Builders Australia’s survey of the industry showing that 70% of builders are being hit by delays and cost increases for key trades and building products.”
Pressure on costs and delivery timeframes caused the Federal Government to give builders an extra 12 months to commence HomeBuilder eligible jobs. Across the rest of the market, it appears unlikely delivery timeframes will be met for jobs which haven’t started coming out of the ground. Off-plan multi-unit dwellings where construction has not commenced are the single biggest opportunity for buyers to take advantage of in Canberra. For 5% of purchase price, buyers can exchange and lock in a price at today’s values. This shifts the risk of cost increases and delays onto the developer and allows the buyer to participate in an upward cycle. According to CoreLogic data, multi-unit values increased by 2.3%, or $11,500 on a $500,000 purchase price, during the March quarter (January-March 2021).
Often the best opportunities within the property market can only be capitalised on by sophisticated participants with the financial resources to do so. This makes it rare to have a simple opportunity, requiring basic research on the buyer’s part and a 5% deposit to enable the least sophisticated participants in the property market to capitalise on supply chain inefficiencies identified by both government and Industry, within a cycle where property values are rapidly increasing.
With Sam Dodimead, local property professional and host of Canberra Property Podcast where you can get to know the consultants contributing toward delivery of new buildings. Stream from wherever you listen to podcasts.
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