SA Excerpt from the 2011 January Market report

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Smart investors target prime suburbs

Conservative buyers, risk-averse developers and cautious councils make for a slow market in South Australia. But savvy investors are starting to make their moves on properties in upmarket locations.

Adelaide is used to slow and steady growth, punctuated by brief periods of hyperactivity. The city has been in its slow and steady phase for a couple of years now, and that looks set to continue, according to Bill Waterhouse, director of independent property advisors Herron Todd White in South Australia.

“There’s a different mental attitude, a different psyche here. I think it’s to do with the conservative nature of Adelaide investors,” he says. “There aren’t the high levels of debt in Adelaide that there are in the eastern states, so the reaction time to market changes is not as quick. There’s no real compulsion to move either way – people aren’t selling up because they have to, nor are they chasing a rising market. So there’s a stagnant period. It’s not the most exciting market in the world, but as an investor, it’s not bad being involved in it.”

Be careful which sector you’re involved in, though. If you’re thinking of investing in the apparently underpriced northern suburbs around Salisbury and Elizabeth, you may have missed your opportunity.

The booming north was largely a first homebuyer mirage, and when that demand was exhausted, prices slumped. “The northern suburbs have got a reasonable supply of land,” says Waterhouse. In terms of capital growth, he adds, “outer suburban areas are not strong”.

Even with the buzz surrounding the imminent arrival of 1,200 7th Royal Australian Regiment (7RAR) personnel, increasing land supply has held prices back. “The military requirements haven’t had a huge impact on values,” Waterhouse confirms. “It’s probably just kept demand at a reasonable level.”

The Real Estate Institute of South Australia (REISA) blames Adelaide’s sluggish growth on the inconclusive federal election result and other distractions, as well as the traditionally slow winter season.

“[However], we are starting to get back on track with football finals and school holidays behind us,” says REISA president Michael Brock. “The spring selling season is now upon us.”

Prime suburbs become prime targets

Defying the stagnant market, prestige suburbs in pockets of the inner east, inner south, North Adelaide and the coastal strip have been performing solidly over the last six months. According to REISA figures, Norwood, to the east of the CBD, has seen a massive 53.5% increase in its median house price over 12 months, although this is from just 14 sales. “Somerton Park [near Brighton Beach] and Unley [in the inner south] were also standouts,” says Brock. “Inner metropolitan Adelaide performed the best out of the regions with a 12.3% rise over the past 12 months.”

Along the coast, prices have peaked, Waterhouse warns. “We had really good growth in the last five years and we’ve taken quite a while to slow, relative to the eastern states,” he notes. “There may be a little bit of slowing in Glenelg, Henley Beach, West Beach, Brighton and Hove in the next two years.”

The smart investment money is now beginning to pour into suburbs adjacent to those prestige precincts. “These areas are the prime ones for growth,” says Waterhouse.

“You’ve got Payneham and Tranmere in the east [7–8km from the city], and Stonyfell and Wattle Park [on the eastern fringe]. These are the sorts of areas where there’s such a strong demand in the inner suburbs that it will spill out. You’ve also got demand increasing in Myrtle Bank, Forestville, Clarence Gardens and Clarence Park in the inner south.”

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