SA Excerpt from the 2011 March Market report

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Adelaide’s solid market was shaken slightly towards the tail end of 2010 as supply began to outweigh demand, but this short-term trend offers the chance for investors to bargain hard.

Adelaide has been one of the success stories of recent times, combining consistent capital growth with tight rental vacancy rates. Couple this with Adelaide’s ‘most affordable capital’ tag, and investors might do well to turn their attentions to the Festival State.

“Over the last 10 years values are up 11% year-on-year, so it’s been one of the best performing marketplaces long-term, and even over 2009 and 2010 the Adelaide market’s pretty much tracked on about average,” explains RP Data research director Tim Lawless.

“It’s still the most affordable mainland capital city to be buying into, which is going to be quite appealing to a lot of people who are price sensitive.”

Sellers flood the market 

It’s perhaps Adelaide’s consistent performance in the face of Australia’s wider economic downturn that persuaded sellers to jump into the market in unpredictably high numbers during the spring selling season last year.

“The confidence of the sellers finally caught up with the confidence of the buyers, so stock flooded onto the market,” says Raine& Horne South Australia CEO Kevin Magee.

However, Magee points out that at the same time interest rates were on the rise, dampening buyer activity and sending capital growth into negative territory.

“This low volume of sales reflects a nationwide trend of residual uncertainty caused by economic turbulence, increasing interest rates and the withdrawal of a large contingency of first homebuyers from the market,” says PRDnationwide research director Aaron Maskrey.

The current listings versus sales volumes situation puts buyers in the driver’s seat, says Magee, but he doesn’t believe this is a situation that will last.

“We’ve gone from a seller’s market to what is now a more balanced market, but definitely in favour of buyers. That situation will continue at least until March, but certainly by June I’d expect a correction in the market.”

Maskrey, however, sees Adelaide’s buyer’s market conditions continuing for the rest of the year, providing a golden opportunity for investors to bargain hard when purchasing.

“The year ahead will see sales activity in Adelaide remain tight. It will prove a tough year for sellers, with an oversupply of product on the market,” he says. “Buyers can afford to shop around and demand some bang for their buck.”

Adelaide’s oversupply situation is mirrored in the South Australian regions, says Magee, with buyers hoping to tap into agricultural or mining areas being spoilt for choice.

“Across the sector as a whole it seems to be uniform both in the country and in the metro areas with what’s happening with stock at the moment,” he explains.

“We’ve got bumper crops and we’ve also had the mining industry decide to come back on line. So we certainly had some initial pickup, but now the buyers are still there and they’re spoilt for choice.”

Affordability is key

WBP South Australia director Bart Quinn sees the distinct possibility that an increasing number of interstate investors will be drawn into the Adelaide property market this year, and with rental vacancies running at around the super-tight 1% mark, he believes that improving rental yields and capital growth are on the cards.

“The Adelaide market has a distinct opportunity to attract a large array of interstate investors to the region. While many markets nationwide are forecasted to struggle with affordability issues in 2011, Adelaide presents a rapidly improving and dynamic market with more affordable investment opportunities than most other capital cities,” Quinn says.

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