Market Report South Australia (June 2009)


First homebuyer activity slows in South Australia

Fewer first homebuyers are entering the market around Adelaide. While the investors have started to fill the void, activity has slowed. Kit Kadlec reports.

The affordability of South Australia has always been one its greatest draws. No other capital city on the mainland offers lower median prices.

But despite the fact you can essentially get more for less here, buyers have lately avoided anything above the lower affordable level. The middle and upper sectors of the property market have suffered.

"There are still lots of first homebuyers in the lower range," says Peter Koulizos, a property lecturer and coordinator of Property and Share Investment. "But in the middle section, people are not re-borrowing to buy a second house of holiday house. They are not re-borrowing to do extensions or renovations."

Instead, many of the usual candidates for buying in the middle and upper ranges in the market are holding off for now. The main reason, says Koulizos, is concern over employment.

"A lot of them are worried about their employment status," he says. "There's that uncertainty."

It's not necessarily the percentage of people who are unemployed, but the actual movement of the figure. Right now, with unemployment on the rise, many fear it could get worse.

"Unemployment is the key," says Koulizos. "Now is a fantastic time to buy, if (emphasis given) your job is secure.  You want to be sure you can keep your job."

Figures from the Australian Bureau of Statistics show unemployment in South Australia has dropped steadily from above 8% a decade ago, but in the past year, it has started to rise again.

For the property market, the lower sentiment has meant most buyers have stuck to the affordable lower end. But even the activity in that sector has been waning, says Koulizos. The market will need investors to start stepping in soon to fill the void, and bump the market up to another level. The early signs of that shift are already happening.

"There has already been a change in the market," says Koulizos. "What we've found is that there are less homebuyers, but investors have increased their activity."

Investors themselves are also looking at the lower end properties, as these tend to offer some of the best rental yields and room for capital growth. And lately, they've seen the fierce competition from first homebuyers subside.

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