Brighter days ahead for SA market
Strong affordability, low supply and high auction clearance rates all point towards further growth in South Australia. Robert Carry reports.
South Australia's residential market has proved to be one of the nation's most resilient - it was the best performing in 2008, succumbed to the slowdown later than other states and territories and returned to growth relatively soon afterwards.
The recovery that's taking place in Adelaide, albeit slower compared to Hobart, Sydney and Melbourne, appears to be gathering pace. The average house price in South Australia at month-end October 2009 was $245,500 according to Residex figures. This is 0.5% higher than it was at the same period last year indicating that South Australia negotiated much of the downturn pretty much unscathed.
"Our local market has remained positive," says Katy Dean, state research analyst at Colliers International. "Even though the number transactions are down on 2008, growth levels across the metropolitan area are still encouraging."
In fact, given the red hot nature of the pre-slowdown market particularly in Adelaide, Dean feels the decline in demand triggered by the global financial crisis may have worked in South Australia's favour. "Last year saw significant price increases for some suburbs across metropolitan Adelaide, so the financial crisis in effect has allowed for a period of consolidation," she says.
LJ Hooker business analyst Dave Maher believes that affordability has been key to South Australia's performance. "Adelaide's median house price is still around $80,000 cheaper than Perth, Melbourne and Canberra and almost $150,000 cheaper than Sydney. So you have less households being priced out of the market," says Maher.
He points out that the first homebuyers incentives are the same in South Australia as they are in Sydney or Adelaide, but $21,000 can go a lot further in South Australia.
High demand in an undersupplied market lift prices
Adelaide has fewer houses on the market now than in winter when stock levels are traditionally at their lowest. This has created a supply issue and helped prices rise. Demand amongst buyers is also very healthy as shown by auction clearance rates. Last year they averaged 36%, they are now at 65%.
Since September 2008, quarter-on-quarter growth has been somewhat inconsistent but notably the Adelaide metropolitan market has still been able to retain a median house price that is above that of the previous year. "In effect this demonstrates that Adelaide has secured a strong position amongst Australia's housing market and is well placed for future growth," says Dean.
South Australia has seen significant medium-term growth over the last five years, with values expanding by 42% since September 2004 when the median house price was just $261,000. Rental returns have also been a plus: "Rental growth averages around 6%, with many suburbs registering double digit growth during 2009," says Dean. A key driver here has been high demand, particularly in the western areas and those located within 10km of the CBD.
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