Rudd Home Sale Thwarted as Canberra Market Slows Pre-Vote

Photographer: Mark Graham/Bloomberg

Kevin Rudd, Australia's prime minister, seen here, and his wife, Therese Rein bought the 465-square-meter (5,005- square-foot) home in the suburb of Yarralumla, a five-minute drive from Parliament House, for A$2.175 million in September 2010, according to allhomes.com.au, a real estate website. Close

Kevin Rudd, Australia's prime minister, seen here, and his wife, Therese Rein bought... Read More

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Photographer: Mark Graham/Bloomberg

Kevin Rudd, Australia's prime minister, seen here, and his wife, Therese Rein bought the 465-square-meter (5,005- square-foot) home in the suburb of Yarralumla, a five-minute drive from Parliament House, for A$2.175 million in September 2010, according to allhomes.com.au, a real estate website.

Australian Prime Minister Kevin Rudd bolstered the Labor Party’s standing in the polls after unseating Julia Gillard as leader last month. The victory hasn’t helped him sell his house in Canberra, where buyers are awaiting the outcome of a federal election due by the end of the year.

Rudd and his wife, Therese Rein, who listed the property for sale on May 29, withdrew it this week, agent Shane Killalea of Peter Blackshaw Canberra, who was marketing the home, said yesterday. Home sellers in the Australian capital sought an average of 4.8 percent less in the week ended July 16 compared with a year earlier, even as asking prices in Sydney, a three-and-a-half hour drive to the north, rose 6.9 percent in the period, according to real estate-data provider SQM Research Pty.

In a city where a third of workers are government employees, Canberra house prices could fall sharply if the Liberal-National coalition wins the election and makes good its promise to cut the number of government workers -- just as it did when it last won in 1996.

“A sizable correction of over 10 percent is possible over the next two years,” Louis Christopher, managing director of Sydney-based SQM, said in a telephone interview.

John Howard, who became prime minister in 1996 when the coalition won government, cut 10,000 jobs in each of the following three years, according to a 2011 report from the Centre for Policy Development, a Sydney-based research group.

Home prices in Canberra fell 8.3 percent from March 1996, to a low in August 1997, while prices jumped 18 percent in Sydney and 13 percent in Melbourne over the same period, figures from Sydney-based researcher Rismark International show.

Tough Going

“I was selling real estate under Howard and it was tough going for about 18 months,” said Killalea. “Canberra’s grown in the past 10 to 12 years, and while there are people who are sitting on their hands, there are also people taking advantage to snap up properties.”

Killalea held six open houses since Rudd’s property was listed for A$2.25 million ($2.06 million), which is more than four times Canberra’s median price. The home, which includes a swimming pool, separate butler’s pantry, a gym and Italianate gardens, was leased this week, Killalea said.

Kathryn Sieper, a spokeswoman for Rudd, confirmed in an e-mail today that the home had been rented.

Rudd, 55, and Rein bought the 465-square-meter (5,005-square-foot) home in the suburb of Yarralumla, a five-minute drive from Parliament House, for A$2.175 million in September 2010, according to allhomes.com.au, a real estate website. They moved out at the end of 2011 after their son Marcus completed his schooling in Canberra, Rudd’s office said in an e-mailed statement on May 31.

Falling Sales

Completed private home sales in Canberra fell 20 percent to 64 in the week ended July 14 from the week of Feb. 24, when RP Data began making the data publicly available. In Sydney, sales rose to 2,044 from 959 over the same period and Melbourne sales increased to 1,239 from 764, figures from RP Data show.

The Liberal Party in January said that if elected it would reduce the government workforce to the size it was at the end of the Howard government in 2007. There were 66,326 government employees in Canberra in December 2012, excluding contractors, compared with 56,648 in June 2007, according to the Australian Public Service Commission, an agency that oversees government employees. Rudd defeated Howard in a November 2007 election.

Labor also has committed to cutting jobs, with Rudd outlining July 16 the elimination of 800 senior positions to pay for an early transition to a carbon emissions trading plan.

‘Downward Pressure’

“The prospect for weaker employment growth, or even declines, together with the emergence of an underlying excess of dwelling stock will create downward pressure on prices,” Angie Zigomanis, senior manager for residential property at researcher BIS Shrapnel, wrote in a report dated July 1.

“Nevertheless, Canberra has the highest incomes of capital cities and affordability is not as strained,” Zigomanis said.

BIS Shrapnel forecasts declines of 5 percent in real terms by June 2016. Australia has eight state and territory capitals.

A Fairfax-Nielsen poll published in the Sydney Morning Herald newspaper July 15 showed support for the Labor Party rose to 50 percent on a two-party preferred basis from 43 percent on June 17. The measure gauges the party most likely to form government under Australia’s preferential voting system.

The recovery in Labor support follows Rudd’s return as prime minister on June 26 when he defeated Gillard in a Labor leadership vote, three years after she toppled him in a party coup. Elections must be held by Nov. 30.

Sheep Paddock

Slower housing activity is at odds with a gradual rise in the national market after two years of declines. House and apartment prices across the eight capitals rose 3.8 percent in the year to June 30, compared with a 3.6 percent drop in the previous year, according to RP Data. That followed 2 percentage points of central bank interest-rate cuts since November 2011, which pushed down variable home-loan rates to the lowest level since October 2009.

The site of the national capital, a former sheep paddock in New South Wales state, was chosen in 1909 in a compromise to those arguing for either Sydney or Melbourne.

American architect Walter Burley Griffin and his wife, Marion Mahony Griffin, who had worked for Frank Lloyd Wright in Chicago, won an international competition to design the new city, which was named Canberra in March 1913.

Canberra has a population of 355,600, with the proportion of workers employed by the government down to 34 percent from 52 percent in 1961, according to the statistics bureau.

“As jobs rise and fall in the public sector, the housing market rises and falls,” said Andrew Wilson, senior economist at Australian Property Monitors.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

To contact the editor responsible for this story: Andreea Papuc at apapuc1@bloomberg.net

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