What if I said there was a sure-fire personal investment that would deliver close-to-guaranteed returns in the next three to five years and perhaps beyond that? Maybe some crypto coins?
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No, I am simply advocating for investing in detached housing in the ACT - not units or apartments, not townhouses - just traditional detached housing.
First some facts to set the scene. According to Domain, in November 2013 median house prices in Canberra were $599,000 and unit prices were $400,000.
In September 2023, median house prices are now $1.042 million and units prices are $567,000. So median house prices have risen by 74 per cent and unit prices by 42 per cent.
The ratio of median house prices to median unit prices in this time has grown from 1.51 to 1.84.
Why is this happening? Strong population growth combined with a growing demand-supply mismatch for detached housing in the ACT.
Population is surging nationally with a net migration of 510,000 people in the past year. If the ACT gets its fair share then that is about 10,000 extra people, at 2.5 people per household that is 4000 extra dwellings needed. That is in aggregate across all dwellings types, not just detached housing.
With dwelling commencement way down in 2023 (that is, less housing on the way), delivering 4000 homes let alone the 4000 houses most people want simply will not happen.
And the ACT will get its fair share of the population growth - people are attracted by the abundance of extremely well-paid, low-skilled jobs in the ACT and Commonwealth public service that cannot be found elsewhere.
With ACT population forecast to reach 784,000 by 2060, unless housing preferences shift rapidly then the demand supply imbalance for detached housing will not just remain, it will grow substantially.
The government's philosophical approach to land release, which is that only 30 per cent of new dwellings can be greenfield development means that of all new supply, less than 30 per cent will be detached housing (and that assumes the government meets its land release targets).
This means there has been chronic undersupply for at least a decade since ACT Labor has been power-sharing with the Greens (and the data above reflects that).
So why is this happening? Is it well-intended but ideologically driven social engineering? Is it something the government can get away with electorally as not enough people are impacted by it personally?
Labor's true position on land release is hard to know given they must govern with the Greens.
Would a majority Labor ACT government have an approach to land release that considers people's housing preferences above other considerations such as increasing density and limiting greenfield sprawl?
There are many simple solutions to delivering preferences that governments can explore.
For example, a genuine strong separately titled dual occupancy policy would unlock massive supply of potential detached (or close enough to detached housing).
In contemplating a Canberra of 784,000 people, exploring potential urban development of the ACT government commercial plantations at Kowen Forest is something that should not be dismissed.
I will note that interest rates are the obvious potential spanner in the works of my prediction.
While the rate of inflation is reducing and there are signs a contraction in the Australian economy could be just around the corner, rising interest rates at some stage could sting the wider market despite the demand-supply imbalance of detached housing.
The ACT is well placed to ride it out in aggregate due to the strong wages generated by the Commonwealth and ACT public services.
The laws of economics state that if demand exceeds supply prices will rise. Detached housing will become increasingly rare in the ACT as a proportion of the housing mix.
So if you have the financial means, grab yourself an investment property (or two or three) secure in the knowledge that solid capital gains over the next few years are yours for the taking thanks to the ACT government.
One final question to pose - should one seek to profit from the ACT government's poor policies arguably at the expense of others?
- Dan Carton is the chair of Havelock Housing and former chief economist at Defence Housing Australia.