Canberra's median house price will rise by a mere 1 per cent over the next three years as oversupply and job concerns take their toll on the market, according to forecaster BIS Shrapnel.
It is the lowest projected increase for any capital city as outlined in the Residential Property Prospects 2012-15 report, issued today. Perth and Brisbane are tipped to have increases of 22 and 20 per cent respectively over the same period, Sydney 17 per cent, Darwin 15 per cent and Adelaide 9 per cent. Hobart is expected to rise by 5 per cent and Melbourne by 3 per cent.
Report author Angie Zigomanis said the bleak forecast was due in part to the relative strength of the Canberra market over the past few years.
''To some extent, it's more that Canberra was ahead coming out of the GFC [global financial crisis] and some of the other states that were weaker are now catching up,'' he said.
Mr Zigomanis said oversupply in the housing market would have a substantial impact on prices, following record levels of new dwelling commitments over the past few years in the capital.
He said the increase in construction - prompted by the release of more than 17,000 dwelling sites by the ACT government between 2007-08 and 2010-11 - had been mostly focused on the apartment sector. ''As many come to completion, we expect to see vacancy rates starting to rise,'' he said.
''We expect to see the market go into oversupply.''
The forecast reinforces comments by ACT Treasurer Andrew Barr last month, that units were at saturation point within the capital after multi-unit sites at Belconnen, Gungahlin and Molonglo failed to sell.
However the ACT government's Indicative Land Release Program outlines 1850 dwelling sites set to hit the Belconnen market in the coming financial year, a figure which has raised concerns among local property commentators.
An additional 950 sites in Molonglo and almost 500 in Gungahlin are also expected to be released throughout 2012-13 and an 8044 square metre multi-unit site at Coombs goes to auction today.
In addition to oversupply, Mr Zigomanis said the median house price would be affected by changes within the public service.
''With the public sector such a key driver of the Canberra economy, that will have an impact,'' he said.
''At the moment, it's only sentiment. Potential buyers aren't willing to enter the market if they think they're going to be made redundant.''
Auction clearance rates in the capital have been volatile throughout the year, reaching lows of less than 25 per cent, according to commercial property services firm CBRE. RP Data reported that home owners across the country were also holding onto properties for longer.
In Canberra, the average time between buying and selling a house increased from five years in March 2000 to 8.7 years in March 2012.
LJ Hooker agent Stephen Thompson said some owners had withdrawn their properties from the market after acknowledging they would not achieve the asking price.
He said sellers were becoming more realistic in meeting the market, after more than a year of high financial expectations.
Peter Blackshaw agent Peter Walker said prices were not what they were two years ago and some owners were being rewarded for hanging onto their properties in a market waiting to turn around.
''People have got to get accustomed to their most important asset not being as valuable as it was before,'' he said.