SA Excerpt from the 2013 October Market report

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Positives behind the negatives?

Capital growth figures don’t look promising for Adelaide right now, but experts argue that better times may lie ahead

RP Data housing market results show that Adelaide is the country’s weakest-performing capital city, with dwelling values remaining relatively unchanged over the three months to July, despite interest rate cuts.

RP Data research director Tim Lawless says conditions in the Adelaide property market can best be described as sedate. At a time when a lot of other Australian markets are starting to move, Adelaide prices remains stuck.

Looking at its longer-term performance, the city’s property market hasn’t tracked as badly. Of all properties sold in SA during last year’s December quarter, close to a third were settled for double their initial purchase price. This is when their owners held them for, on average, 13.2 years. The average capital gain was $261,144. In Adelaide, the windfall was even higher at $282,813.

Australian Property Monitors (APM) senior economist Andrew Wilson says the real challenge for the Adelaide housing market remains the economy. The May unemployment rate for the city was 6.1%.

Deloitte Access Economics partner Chris Richardson agrees and says that one of SA’s problems is that the state responds more to the exchange rate than interest rates. The news on the former – despite impressive falls in recent months – has been less good than it has been on the latter.

Lower interest rates may be a great benefit for the market, but so far they’ve had little impact on retail sales or the pace of housing construction in SA. Richardson believes both sectors remain in the doldrums.

“The lift in Adelaide’s residential vacancy rate over the past two years has been significant, with the rise in vacancies indicating that the housing market is no longer undersupplied, partly reflecting weak population and job growth. In turn, that has helped drive a modest [level of] approvals for new residential construction.”

The net result of this situation, along with the rising unemployment rate, is that overall growth is forecast to be pretty modest, Richardson says.

“Alongside the state’s manufacturing woes, the fading strength of housing construction has been a particular problem. But there is enough good news in the pipeline from lower interest and exchange rates to help ensure that SA’s economy is expected to pick up from its current lows.”

SA one of least expensive markets

Meanwhile, SA has been ranked as one of the country’s most affordable housing markets.

The latest APM figures suggest that house prices in Adelaide remain among the lowest in the country, while a recent report from the Housing Industry Association (HIA) suggests the country’s most affordable land is in SA, notes Greg Moulton, president of the Real Estate Institute of South Australia.

In the latest HIA-RP Data Residential Land Report, half of the 10 least expensive regional markets in Australia were in SA. SA regions to make the list included Murray Lands, the Southeast, and the Eyre Peninsula. None of the 10 most expensive markets were located in SA.

SA’s relatively inexpensive land prices, combined with historically low interest rates, make it an opportune place to build, if you’re in the financial position to do so, HIA executive director Robert Harding says. “Clearly regional SA has an affordability advantage over other regional areas interstate.”

Suburb to watch
Adelaide CBD


Vibrant, cosmopolitan, affordable and accessible, the Adelaide CBD has it all, according to Jim Phillis of Phillis Real Estate. “You can walk, catch free or inexpensive transport to anywhere you need to go. Being so close to the Adelaide Hills and beaches, it offers an appealing and convenient lifestyle, minus the big-city traffic jams experienced interstate.”

A great strength of the CBD is the variety of its accommodation, he says. “There is a blend of heritage buildings and modern, stylish apartments, and plenty of student accommodation, so you can take your pick!”

With access to over six universities, four public schools, seven private schools, numerous technical colleges, and a host of vocational training institutions, the Adelaide CBD is a great education hub. It is also home to the state parliament and many key state government offices, and the base of many corporate head offices and local businesses.

Phillis says the Rundle Mall is the major focus of retail shopping outlets, with a combination of local and
international brands, while the always-buzzing Adelaide Central Market off ers a smorgasbord of choice in local  fresh food and cheap eats.

The CBD is also a hive of activity on the construction front, with a number of major projects underway that will make the area even more appealing, he adds. Historically, Adelaide has shown more stable property price movements than other major eastern state cities, Phillis says.

“We believe that within five to 10 years there will be a 20% to 40% increase in property prices, with the tightly held footprint of the CBD creating strong demand into the future.”

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