When the ACT government lodged a development application for a prime mixed-use block in the Gungahlin Town Centre recently, it's possible several property developers had to still their beating hearts. The DA includes the construction of up to 1121 new dwellings in an area close to where the light rail line from Civic scheduled for completion within four years will terminate. And as developers know, apartments built on or close to rail lines are popular sellers off the plan to both investors and owner/occupiers. And with foreign and domestic buyers fuelling a decade-long apartment-building boom in Canberra, Brisbane, Sydney and Melbourne, the ACT government and developers may figure the sky is a deep blue all the way out to 2020.
In many respects such optimism is well founded. The people who've amassed fortunes building apartments donate extensively to the major parties, in part to ensure the devising of policies and regulations that are good for business. One example of this attention to detail was Federal Treasurer Scott Morrison's recent decision to relax the foreign investment classification of an "established dwelling", thus allowing foreigners to buy apartments on which other foreigners had failed to settle. Another is the major parties' unqualified support for high immigration levels, despite governments' reluctance to adequately fund the infrastructure needs of a rapidly expanding population.
Signs are, however, that the apartment boom is retreating, with recent Bureau of Statistics figures indicating that approvals for the construction of new homes in October decreased 12.6 per cent in seasonally adjusted terms. This is undoubtedly an outcome of efforts by regulators, led by the Reserve Bank, to force banks to rein in investment property lending and reduce household indebtedness.
In its twice-yearly financial stability review in October, the Reserve warned that the risks from an apartment oversupply in Melbourne and Brisbane were now apparent. Reports that developers are offering rental guarantees and extended settlement deadlines for newly built apartments bear the Reserve's views out. One international sales agent has estimated that Chinese buyers of Australian apartments have fallen 50 per cent in the second half of 2016, partly because finance is more difficult to obtain in Australia and partly because the Chinese government is restricting capital flowing out of the country.
Such a climate ought to give the ACT government pause for thought, particularly given the imperative it has to maximise returns on the dwindling non-renewable asset that is public land. There's certainly an argument that laying down light rail in tandem with infrastructure for service and employment infrastructure enhances the appeal of both. However, by encouraging high-rise apartment buildings in town centres like Belconnen simply to expedite its goal of having more "vibrant" town centres and a full suite of "after-hours" activities, the government runs the risk of importing Brisbane's and Melbourne's overheated apartment market into Canberra.