Feisty Canberra bucks the trend, RBA predictions of a boom, updates to the Building Act and COLA, planning precinct shakeup in the Inner North, and the Our Place campaign – 2020 is off to an interesting start.
Message From The Director | Kastell Building
Feb 2020.
2019 was a story of welcome surprises for Canberra. The year began with Sydney and Melbourne house prices continuing to decline and widespread expectation that Canberra would follow. At a time of global slowdown, and Australia’s too-good-to-be-true growth run of 28 years, a downturn in Canberra seemed fairly likely. True enough, house prices in Canberra saw minor decline over the year, but this was more than offset by surprisingly strong growth in apartment values, resulting in the median residential price growing by an impressive 4.3% over the year. Once the Sydney-Melbourne downturn bottomed out in the third quarter – with up to 18% drop in house prices – Canberra picked up pace again, finishing the year with total sales up by 57% on 2018. Now that the RBA is predicting Australia’s 2019 growth rate to almost double in 2020, and the HSBC predicting national house prices to increase by 5-9% over the year, 2020 looks to be an especially bullish year.
Canberra, undeniably the strongest market in the country, is poised for solid growth this year. 2019 saw records fall in suburbs from Aranda and Cook to Red Hill and Forrest, who together counting four sales over five million. Clearances rates recovered marvellously over 2019 to 66.7 in November from 44.8 a year earlier. Canberra’s commercial clearance rate is currently sitting at 1%, showing continued strong demand for commercial property. More generally, Canberra remains a juggernaut among Australian markets, with an enviable unemployment rate of 3.3% and still holding the crown for most affordable market in the country, helped by growing incomes and dropping power costs. Development applications open for public comment show continued developer interest in Canberra. Manuka alone has more than 480 units waiting approval, while Denman Prospect and Casey have over 100 each. In practical terms this means that builders and tradies can continue to expect a strong pipeline of work over the coming year.
In response to the improved outlook the ACT government has stepped up Territory Plan variations. More government streetscape works in suburbs can be expected since the proposal of Territory Plan Draft Variation 369. The variation seeks to achieve 30% tree canopy cover (or equivalent) and 30% permeable surfaces in urban areas by 2045. For land developers this will mean an increased number of trees to be planted per meterage of roadside, for landscapers this will likely mean a rollout of tree plantings on roadsides in established suburbs along the lines of Hornsby Shire Council in Sydney. Draft Variation 373 proposes to remove the requirement for new suburbs to be connected to the gas main, as part of a government strategy to encourage electricity use. Draft Variation 368 proposes a big shake-up of planning along Northbourne Avenue, merging the Inner North and Northbourne Avenue precinct codes to create the Northbourne Avenue Corridor Precinct Code. In the process, existing provisions will be ‘clarified’ (read: tightened) to close loopholes and strengthen criteria. Already the strictest precinct to develop in the Territory, it comes just in time to catch several large projects before they have put in their development applications. Draft Variation 368 will not likely hinder the pipeline, but it will add more requirements to an already difficult rigmarole.
The ACT government, realising that planning should anticipate even stronger growth than last year, has judged that the industry can bear more bureaucracy. An amendment to the Building Act 2004 will require builders to obtain more certificates from engineers, and further empower inspectors under the act to compel rectification work from builders. Amendments to the Construction Occupations (Licencing) Act 2004 mean the time limit for enforceable undertakings will be extended to 10 years 6 months after practical completion and include the surprising addition that enforceable undertakings can now be issued directly to directors. The Master Builders Association is naturally opposed to this, pointing out that these amendments do not address any of the 43 ACT Building Reforms or the 24 Building Confidence Report reforms. That said, the amendments likely have the community support required to pass. Industry dialogue is currently dominated by anecdotal phoenixing, flammable cladding, quality issues, and dodgy developers.
Although hefty, these amendments are easier to weather than the sidelined Building Code of Practice, which proposed to extend responsibility of the builder to include greater liability for design and engineering. This drastic move was proposed back in 2018 when the construction industry was dominating the news cycle and has been on the backburner ever since. Something as radical as this can probably be ruled out at this stage, but the industry has a well-publicised crisis of confidence which anecdotal evidence from real estate agents suggests has dropped demand for off-the-plan apartments. It is an unwelcome feature of today’s industry; developers who cannot fully finance themselves are finding it tough to cashflow their projects. In response, the Master Builder’s Association, Canberra Business Chamber, and Property Council of Australia have launched the Our Place campaign to share the positive side to construction in Canberra. How effective this will be is hard to say – as the derisive comments online suggest, more stringent government regulation will raise confidence far more than a media campaign. Moving forward into 2020, the value of a reputation for quality will become even more apparent than it is now.