It’s all quiet on the southern front – for now, anyway.
Like the rest of the Australian property market, South Australia has had a very quiet winter. The cumulative effect of the seasonal lull, the federal election, the protracted bargaining period after the polls closed and the continuing impact of successive interest hikes earlier this year means it’s been ‘all quiet on the southern front’.
RP Data’s senior research analyst, Cameron Kusher, reckons the state’s capital – which has been a solid but not stellar performer in recent years – has been as flat as a pancake throughout the winter. “Over the three months to July 2010, Adelaide home values have recorded a value growth of 0.2%,” says Kusher. “During July itself, values also recorded growth of 0.2%.”
The latest Residex data supports this trend after median house values grew by less than 1% to $408,000 in the August quarter. Units suffered a 1.68% decline in median values during the same period, only notching up 1.77% growth in the year ending August.
And, despite the spring season promising more market activity, it seems like gains are unlikely to be had in the short term, according to Adelaide local, university lecturer and author of Australia’s Top Suburbs Peter Koulizos.
“It’s been very slow coming out of winter and the post-election period,” remarks Koulizos. “There’s a lot of uncertainty, fuelled in part by the concerns over the new political order. While the optimist in me hopes that the new government will work well – after all, other countries seem to cope with minority governments – the pessimist in me thinks it’ll be a time of no major decisions.”
Koulizos reckons that political inertia at federal level will bleed into the housing markets – not least due to the fact that the economic stimulus packages that characterised 2009 are now gone – and the fragile nature of the Labor- Green-independent alliance will make it more complicated to introduce similar measures in the coming months.
He’s philosophical about this fact, though. “You can’t expect the market to go up all the time. In fact, I expect the lull to continue throughout spring: I think we’ll see more supply, with little demand. While that won’t mean big price increases over the next six months, it will mean that Adelaide will become a cracking market for buyers.”
Indeed, Koulizos reckons that patient investors stand to make a killing. “Mid-December to mid- January will be a great time to pick up a bargain: seasonally, the market will be slow again – only by that time, there’ll be a stock overhang from the spring.”
There’s gold in them thar hills
That’s all well and good, but if there’s only weak growth on the horizon – or potentially no growth at all – what’s the point of bagging a property below market rate? Koulizos reckons it’s the long-term view that matters.
“South Australia’s mining industry will undoubtedly drive future growth in the state,” he says. “For one, you’ve got the Olympic Dam expansion project, which is set to make that mine the largest open-cast mine in the world. There have been delays with that – chiefly due to mineral price fluctuations during the GFC which has slowed [mine owner] BHP Billiton’s plans – however, the environment impact process is proceeding apace.”
Even if there are further delays, Koulizos argues that the copper, gold, silver and uranium that forms the core of the Olympic Dam project will still be in the ground: hence, it’s just a matter of time before the mine is expanded. On top of that, smaller operations are already cropping up all over the state.
“Other mining companies are already producing, and there are a significant number of gold, copper, uranium and mineral sands miners who are projected to do very well over the next year or two,” he continues. “When you add to that the influx of defence personnel and military technology companies to South Australia over the last few years, the fundamentals are all there for increased employment, more demand for housing and significant growth. That’s why I’m putting my money where my mouth is, and am hanging onto four units I’ve just built as well as buying two more in Port Willunga.”
Port Willunga is one of the suburbs that Koulizos picks out as stars of the future, along with its fellow southern suburbs Reynella and Christies Beach. All of these have been earmarked in South Australia’s 30-year plan to establish commuter hubs (or transport-oriented developments) around Adelaide, and which will benefit from rezoning to encourage medium-to-high density housing and infrastructure spending.
Bart Quinn, WBP Property’s state manager for South Australia, agrees, and also highlights Seaford as a key suburb which will benefit from the planned duplication of the Southern Expressway. The $445m project is planned to commence in 2011 and will take three years to complete.
He also reckons that Brompton, one of Adelaide’s inner north-western suburbs, could also benefit from the 30-year plan. “Brompton, as well as Bowden and surrounding suburbs, will benefit from the tram line extension from the CBD, currently under construction,” he comments. “The locality will also benefit from the redevelopment of a 10-hectare former Clipsal site by the Land Management Corporation, as well as the ‘Bowden Village’ development which will consist of a medium/high density transport orientated development to create a distinct village feel.”
Quinn highlights that the 12 months from June 2009 saw a 13.7% increase in Brompton’s median house price, and he believes that continued development will ensure values continue to perform in the area over the coming year.
He also argues that other inner-northern suburbs are becoming increasingly popular as Adelaide’s inner-eastern and southern suburbs become more unaffordable. This is particularly the case for purchasers with lower borrowing capacity who are attracted to period homes.