SA Excerpt from the 2013 September Market report

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Steady into recovery she goes

News Adelaide’s property market has moved into recovery is tempered by the fact it is set to be a long, slow recovery

Current received opinion is Adelaide’s property market reached the bottom of the cycle last year and is now in the early stages of recovery.

Australian Property Monitors senior economist Andrew Wilson says the signs are all there that the Adelaide market is starting to move upwards – after quite a journey through the correction phase. It is no secret, over the past few years, the SA economy has been struggling, because of the downgrading of resource projects and Australia’s moderated economic environment. This has helped keep the Adelaide market subdued, Wilson says.

“Even though SA’s unemployment rate is still sitting around 6%, there are signs of increased buyer activity and even price growth. They are moderate but they are there. And, after the market bottomed out last year, they are now creeping upwards.”

Helped along by low interest rates, capital city markets are moving upwards generally, Wilson continues. “But, in Adelaide, it is also because of a move by investors back into the bricks and mortar market. There is good value purchasing: it does offer the lowest prices of all the capital cities.”

A number of boxes are being ticked and there should be a concerted period of improved activity coming up, he says. “The market is still 4-5% below its previous peak but, in Adelaide, the bottom is not too far from the peak. Once there is an improvement in the local economy the market will head back towards that peak… It won’t happen this year though, but probably next year.”

BIS Shrapnel Business Research and Forecasting senior manager Angie Zigomanis says his organisation’s most recent research indicates Adelaide’s estimated median house price of $398,000 at June 2013 represents a minimal 1% increase for 2012/13.

“Construction in South Australia in the post-GFC years exceeded underlying demand, and the excess dwelling supply has been reflected in vacancy rates above the balanced market rate of 3% since 2011, which in turn has impacted on rents and prices in Adelaide.”

South Australia’s economic conditions have been weakened by a high Australian dollar and declining building activity, with a negative impact on confidence, he continues.

“Nevertheless, with Adelaide being the most affordable of the mainland state capitals, the reductions in interest rates have supported prices in 2012/13 and should keep price growth slightly positive over the next three years.”

Zigomanis says BIS expects South Australia’s dwelling oversupply to be absorbed by the end of this period – although the prospect of the next tightening cycle in interest rates by this time could delay the upturn in prices. This means Adelaide’s residential market is forecast to show only limited growth in the median house price over the three years to 2016.

Meanwhile, REISA president Greg Moulton believes there is not going to be much change or movement in the market for some time. Prices are likely to remain steady through 2013-14, but they should take off in 2015, he says.

“Key performance indicators like interest rates, which are low, and unemployment, also low, are looking good,” he continues. “But consumer confidence needs to improve a lot and, when it does, we will see an improvement in the market.”

Market stimulation would help

Leadership – at both federal and state government level – is what is needed to kickstart the market, Moulton says. For example, a cut in the official cash interest rate would be warmly welcomed by the housing sector to stimulate a much needed boost in the market and help reinvigorate consumer confidence.

“While interest rate cuts over the past 12 months have been welcome, we continue to see buyers and investors in a holding pattern” he said. “Recent cuts saw a slight boost in confidence in the property market, but generally there is still a great deal of uncertainty.”

Moulton also said that the Reserve Bank should consider lowering rates later this year if the right conditions prevail. “With the help of a steady interest rate, housing affordability may start to improve so more people can achieve their dream of owning a home,” he says.

Conversations at government levels about lessening the burden of property tax for South Australian home owners and investors would also be welcome, he adds.

Spotlight on: Adelaide’s high end suburbs

Adelaide’s high end property market is continuing to perform very well, according to REISA president Greg Moulton. There have even been some $2 million sales in the higher end suburbs, he says.

“The demand is definitely there and keeping the prices up. Auctions are going well too.”

Suburb to watch
Gilberton


Gilberton is on the northern bank of the River Torrens just 3.22 km from Adelaide’s city centre. Bordered to the south by Linear Park and the city’s Botanic Gardens, it is a small, but pretty, tree lined suburb, which is largely residential.

Reed Partners Property director Billie Reed says Gilberton’s proximity to North Adelaide and the city, along with a lot to off er in “lifestyle points”, should make the suburb attractive to investors. It is very close to some of Adelaide’s leading private colleges and schools, features great shopping facilities close by, and has a good public transport system.

She adds that because Gilberton is a small suburb it almost melds into Walkerville and takes advantage of all that is happening in Walkerville, like the new Walkerville shopping precinct, the soon-to-be-opened ‘The Watson’ Boutique Hotel and Apartments and the new Walkerville Library.

It is an interesting and appealing mix of house styles – quality mansions, traditional Villas, townhouses and units, Reed says. The suburb’s northern section has a historic character thanks to some large and ornate Victorian houses, which are protected by government regulation.

Largely due to its position nestled among some of the best suburbs in Adelaide (Medindie, Walkerville, North Adelaide), Gilberton has always held its own in terms of pricing, she continues. “Its ‘graph’ in relation to house prices, I believe, will always be on the incline.”

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Top Suburbs : freshwater , tuart hill , st kilda west , menai , queens park

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