15th May 2009
Investors are already making their way back into Adelaide even as growth slows.
Adelaide as the best performer in 2008 appears to have succumbed to the downward pull of the economic slowdown as shown by the recent drops in median prices for both houses and units. Property transactions have dwindled and the time it takes to sell a property has also lengthened considerably.
Despite these, experts remain upbeat about the prospects of the Adelaide housing market.
"Prices are holding well," says Robin Turner, president of the Real Estate Institute of South Australia. "There have been some adjustments to property values in price brackets outside of the first homebuyer range (over $500,000), but the lower end values are actually creeping up. The South Australian property is resilient and will continue to ride out the downturn."
Katy Dean, state research analyst for research with Colliers International says this is because Adelaide has all of the essential elements to support a good investment.
"Adelaide is affordable and has strong growth in population infrastructure and transport," Dean says.
"The Government has been very proactive about the infrastructure development in the city and outer region, making the centre of the capital easily accessible to the wider regions. This means that buyers and tenants interested in affordable property with more space in the outer lying lifestyle suburbs now have an easy commute to the city."
Dean says she wouldn't be surprised to see a significant increase in property price growth over the three months to June, as a result of first home buyers looking to take advantage Government incentives before the door closes for good.
"We can expect that there will be capital growth across properties in Adelaide in the realm of 5% to 10% over the June quarter of 2009," she says.
"If the First Home Owners Grant incentive is not extended after June 30 we may see a drop off in buying activity and a flattening effect on property values, but values should at least achieve 5% growth for 2009."
Preparing for the next upturn
Dean says the impact of the global financial crisis has temporarily restricted levels of growth traditionally achieved in the Adelaide property market, but she views the change in a positive light.
"If you compare the growth in the Adelaide property market in 2009 to the 20% growth achieved 2007, the picture doesn't look great, but the truth is that these levels of growth were just not sustainable."
Dean says the impending recession has given the Adelaide market the time to consolidate in preparation for the next upswing in property values.
"2009 is a good time for the Adelaide market to slow down, recap and then draw investors back in with affordable property and low interest rates."
A warning to investors
Property lecturer and coordinator of Property and Share Investment, Peter Koulizos says Adelaide is currently attracting a lot of first time investors but he warns those with little experience to tread carefully.
"I have seen hotel rooms packed with eager investors lately, listening to what spruikers have to offer in their seminars," he says.
"Although this is a very optimistic sign, a lot of these buyers have never invested before. So while I encourage investors to go to as many sessions as they want, be careful not to buy anything before consulting someone who you can trust to check out all of the details of the purchase.
"Unfortunately some spruikers have already returned to the market and there is the risk that there will be a lot of people sucked in this time around, just like we saw in the 1990's."
Suburbs to watch
Koulizos says there are three suburbs within the city of churches which he would recommend to investors seeking properties with long term capital growth potential.
"Christies Beach has plenty of houses available at a median house price of around $300,000 located less than 1km from the beach," he says.
"Prices have remained stable in the suburb despite the current gloom period mainly because the affordability continues to attract first home buyers looking for houses and investors looking for sub-division potential."
Dean says Christies Beach is being driven by its long awaited foreshore development, which will allow for some gentrification in the suburb in the years to come.
Thebarton and Torrensville are also high on the Koulizos hit list. Located around 2-3kms from Adelaide's CBD, these suburbs attract a higher rental potential than Christie's Beach and allow buyers to pick up a piece of Adelaide charm for a decent price.
"Investors can pick up a three bedroom character or period home for $400,000 and have it rent for $350 to $360 a week. Values are creeping up in the suburb for this reason."
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