Market Report South Australia (May 2009)


Property markets right around the state are starting to shake off the slump as economic recovery takes hold in SA.

House values in Adelaide rose a mere 0.49% in the year ending May 2009. That was still a better performance than most other capital cities, and indications are that Adelaide is set to return to much more robust growth in the coming year. In the three months to May, prices rose 1.93% to $377,500. The average weekly rent is now $310 and the median yield is 4.28%.

Unit prices were up just 0.05% to $295,000 in the last 12 months, but they showed a strong 4.16% increase in the three-month period to May. Unit rents in Adelaide are among the lowest in the country at just $260 a week for an average yield of 4.60%.

"During 2007 we topped the charts in capital growth," recalls Anthony Toop, managing director of Toop&Toop Real Estate in Adelaide. "2008 started off reasonable but we lost a lot of ground over the spring period, starting in August. Apart from the first homeowners band, which is separate and driven by the bonus, the middle to top of the market suffered. We've seen, anecdotally, 10-15% softening in the very top but that's very much stabilised in the last six months."

Toop says that 2009 has generally been a strong year for Adelaide so far. "Pricing has been fair but not leaping. Basically solid," he says. "I think we'll see growth for the next year or two with isolated pockets that will do very well and isolated pockets that won't do so well."

One of Toop's concerns is a possible over-reaction to the phase-out of the federal government's First Home Owners Boost, which halves on October 1 and cuts out on December 31. "Thank goodness the government's staged the wind-back of it," Toop says. "The other big, big benefit is that banks have been tough with first homeowners and all lending, and that will actually underpin what would otherwise have been potentially a big problem."

The recent economic stimulus payment to taxpayers has had a greater effect on Adelaide than on the larger capital cities, according to Toop. "In a small environment, the impact is probably more noticeable," he says. "Generally, Adelaide didn't have the big highs so it didn't get the big crash and there's definitely no oversupply. The previous two busts, both times there was large oversupply and there were high interest rates and high unemployment."

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