Slow and steady long-term performance
Adelaide’s property market is showing signs of life, but investors who hold for the long term are reaping the most rewards
According to the RP Data-Rismark Home Value Index, Adelaide was one of the only capital cities (alongside resources powerhouse Darwin) to record gains in home prices for the May quarter.
The city recorded a 2% increase in property values, but it’s nothing to get too excited about just yet: Harcourts Brock Williams director Michael Brock believes this result has been largely achieved through strong sales at the top end of the market, rather than the property market rebounding as a whole.
Brock says many of these sellers have owned their homes for a long time – at least 10 years – and, as a result, their property values have “doubled, trebled, or [increased] even more so” by the time they’ve sold.
“There is still some fallout at the lower end of the market, where people haven’t quite got through the tough economic times,” he confirms.
Elsewhere in the state, Real Estate Institute of South Australia vice president Ted Piteo says renewed consumer confidence is leading to stronger sales, particularly in regional areas backed by mining projects.
“The resources areas and the growth they have had has been impressive and a lot more executives and workers have moved into those areas to work in the mining sector,” he says.
“The lower interest rate is certainly helping, and we’ve seen a lot more activity than there was this time last year; we are pretty positive about the next quarter.”
Solid long-term performance
While Adelaide’s property market may be moving at a sluggish pace in the near term, it’s clear that the city and the broader state of SA have performed well for investors over the long term.
RP Data research shows that, of all homes sold in SA during the December 2012 quarter, around 30% achieved a sale price of more than double their initial purchase price.
The average capital gain was $261,144, while the average hold period for SA homes was 13.2 years. In Adelaide city, the windfall was even higher at $282,813.
It goes to show that buyers seeking a long-term buy-and-hold property investment may want to consider well-located properties in the region, says Andrew Peterson of NextHotSpot.com.au.
“SA is currently lacking the drivers for growth in the near term but has outstanding long-term prospects both for the overall economy and well-located residential property,” Peterson says. “For instance, projects like the rezoning plan for Brighton Road in Hove are worth keeping an eye on.”
Under the proposal, the maximum height for buildings along a 1.5km section of Brighton Road would rise from two storeys to four storeys. Up to 12 houses would also be rezoned from residential to commercial, potentially paving the way for them to be converted into carparks.
“The rezoning would likely hurt adjacent housing but potentially benefit unit pricing nearby,” Peterson concedes. “But as economies and city populations grow, there is a trend toward smaller dwellings with good CBD and lifestyle access, particularly on transport links, which this rezoning looks to support. Obviously the devil is in the detail, but this is an area and a rezoning process worth watching as the SA economy waits for more impetus.”
Suburb To Watch
Best for: Buy-and-hold investors.
A residential seaside suburb of Adelaide, Somerton Park is popular with owner-occupiers and investors alike – and for good reason, says local real estate agent Jarad Henry from LJ Hooker Glenelg.
“Somerton Park is arguably Adelaide’s premiere beachside suburb, but it has all the features without the summer crowds and congested parking and density that Glenelg carries,” he says.
“Brighton Road is the most expensive street in Adelaide, and people here know that by crossing the road you can add $100,000 to your asking price.” The range of properties on off er is varied, with older 1950s housing stock being redeveloped to make way for modern homes.
“Newer styles, including two- and three-storey courtyard townhouses, are popping up, as they off er a low-maintenance lifestyle by the beach,” Henry explains.
“There is only one certain area on the eastern side of Brighton Road that I may have steered buyers away from in the past. Don’t get me wrong – there are some very nice homes there, but it did contain some community housing. They have since been knocked down and are being redeveloped, so right now that area is providing a great entry point for investors.”
The central suburb, situated around 10km from the CBD, is home to the prestigious Sacred Heart College, and residents have every service and amenity on their doorstep, creating an enviable lifestyle that will attract renters and buyers for years to come.
“There’s a lot of good local shopping centres and facilities located along Brighton Road; plenty of local schools and daycare centres. And Glenelg is a short walk away if you feel like taking the dog for a walk and grabbing a coff ee,” Henry adds.
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