This year is expected to be a calm one for South Australia’s property market, but investors are keenly watching the longer-term prospect of major growth on the back of the state’s growing mining industry.
Adelaide has experienced a slow growth patch of late, but property professor Peter Koulizos puts this down to the nation’s current economic situation rather than pressing local issues.
"Over the last few months Adelaide’s been very slow compared to the same time last year. Adelaide isn’t much different to the rest of the country, and interest rates have had a big impact on the property market," he says.
"Also, restrictive lending practices have stopped a lot of people from borrowing to buy property, even though they may want to. So there are no particular local factors that are keeping the market down, it’s just what’s generally happening throughout the country."
This is a view also expressed in Herron Todd White’s Month in Review Report, which notes "influencing factors in the residential market will obviously be interest rates movement and overall influences of economic factors such as employment and inflation."
Real Estate Institute of SA (REISA) president Greg Nybo agrees the market has lost some momentum, but believes it’s the lower end of the market in particular which has slowed compared to this time last year – due to higher interest rates and the removal of the first home owner grant boost.
He adds, however, that even during slower periods, the Adelaide market hasn’t gone backwards in 30 years, and that buyer activity hasn’t come to a complete standstill.
"There is a misconception that people are not buying or selling at the moment," Nybo says. "The market is slower than three to four years ago, but there will still be around 20,000 house sales in SA this year. As such, people interested in buying and selling should remain active at all times."
Time to buy
While he expects growth to remain subdued during 2011, Koulizos wouldn’t advocate selling up any time soon. In fact, he predicts that – once interest rates have stabilised and Australia’s second mining boom takes off – Adelaide property prices will be sent sky high.
In the meantime, as sales volumes are down and prices are steady, Koulizos believes there are some fantastic buying opportunities out there.
"I was just speaking to a family friend who picked up a property in Hilton, which is only 2km from the city. This was a very run down property on 400m2 advertised at $365,000. For whatever reason, the owner was desperate to sell and they agreed to sell it for $275,000. So that’s the sort of opportunity you can pick up in a slow market, because some people unfortunately have to sell at almost any price," he says.
In terms of where to buy, inner-city character homes are proving popular with buyers. Koulizos cites Torrensville, Mile End and Kensington Gardens as examples of popular suburbs that have a potent mix of character properties and a desirable inner-city location.
"They certainly have very good clearance rates at auctions. And they’re often being sold either before auction or in the first week or two of being listed," he explains. "And the people who can afford to live close to the city, and in particular buy renovated character homes, don’t have much problem getting the money, anyway."
Herron Todd White’s Month in Review expects areas such as Toorak Gardens, Dulwich, Rose Park, Norwood, St Peters, Walkerville, Gilberton and Medindie to hold – and perhaps improve – their value, but warns that "the very upper end of those markets, being the $2.5m to $4.5m may hit a hurdle this year after some significant rises last year."
Looking further afield, the rezoning that’s taking place in the Onkaparinga City Council area has piqued the interest of investors with an eye for creating the medium density developments that the new rules will allow. Koulizos cites Christies Beach and Port Noarlunga as two areas of particular note, pointing out that eight of his students have bought in Christies Beach alone in the past nine months, in anticipation of the new zoning laws coming into effect.
Do you have more than $120k in your super fund? You could use your super to buy property - Find out how