20th March 2009
It's easy to point to the slipping prices in and around Adelaide in recent months and there's no doubt demand has fallen off in this once-hot capital.
Yet seeking a broader perspective reveals Adelaide has still outperformed all other capitals other than Darwin in terms of capital growth for houses over the 12 months of 2008, according to Residex. Adelaide's median price rose 4.71% over that period to reach $370,000 by December.
Unit growth was third only to Hobart and Darwin over the same period, reaching a median of $287,500 after a 12-month rise of 7.23%.
"The South Australia market is still performing better than most state property markets," says Peter Koulizos, property investor and author of The Property Professor's Top Australian Suburbs. It doesn't mean that it's performing very well, but it has performed better than the rest. We haven't seen some of the same sort of drops we've seen in Western Australia or the eastern states."
Investors can take stock in Adelaide still being the most affordable capital city in the mainland of Australia, says Koulizos. Because of that affordability throughout the state, the boost to the First Home Owner Grant has a greater affect in South Australia than other more expensive cities, he says.
"You could buy a brand new three bedroom, two bathroom home here for $250,000, and the grant they get from the federal government totals 10% of that price," says Koulizos. "In New South Wales, the equivalent price for that type of home would be $400,000."
However, one of the issues in South Australia has been too many properties for sale currently matched by only tepid demand. Some sellers are still looking for pre-2009 prices on their homes, but the reality is, values have come down since then, says Matthew Richardson, a valuer with Herron Todd White.
"If they are realistically priced, they are still selling," says Richardson of medium-priced homes. "Those that are overpriced are sitting there and will be sitting there still later."
Those looking to unload a property at the moment are going to face a lot of competition.
"There's a lot more properties on the market," says Richardson, noting that volume could continue to increase in the next few months.
Right now, the demand is in the lower priced bracket.
"Anything sub-$200,000 or around that, they are going along quite nicely," says Richardson. "Yet the upper end is taking much longer to sell."
Koulizos says there are signs that first home buyers will be jumping into the market soon. Whereas last year it was much easier to find loan with little or no deposit, and the $7,000 from the First Home Owner Grant could be used as such a deposit, that is no longer the case due to the credit crunch.
"Now banks say you can't use the grant as a deposit, and you have to have a savings of your own," says Koulizos.
So many interested buyers have been saving since late last year and may soon be ready to purchase a home.
"As the year progresses, more people will qualify as they'll have more money saved up and a history of a savings plan," says Koulizos.
For now, there's been a greater number of people showing up at inspections, but little sense of urgency to buy yet.
Hot and cold
Aside from the selling price, buyers and especially investors are certainly avoiding certain locations in South Australia. One such area is the holiday homes.
"When things aren't so rosy, the first thing to go is the holiday house," says Koulizos, noting an oversupply of these properties in the state at the moment. "And now with the holiday season over, it will stay on the market for many months to come."
Suburbs based around the state's mines are a bit harder to predict.
"I think there's a fair bit of uncertainty at the moment when it comes to mining," says Richardson. "We definitely have noticed a bit of correction in values in Port Augusta and Whyalla."
Yet Koulizos says South Australia has a much healthier mining outlook than Western Australia.
"There's doom and gloom over mining at the moment, but out o the 3,000 jobs BHP cut recently, 2,000 were from Western Australia and only 200 were lost in South Australia," he says.
There's a greater diversity of rare minerals in South Australia, such as copper, gold and uranium, and that bodes well for the future, says Koulizos.
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