Adelaide joins other Australian capitals in housing decline
In a turnaround from last year, the median house price in Adelaide dropped this quarter by 0.5%, representing the “sharpest decline since September 2012”, according to the Domain House Price Report for March quarter 2016
Within the next 12 months, South Australia is expected to be the weakest performer of all the Australian capitals. Falling prices in the housing market are “a consolidating result for Adelaide after a strong finish last year”, says Andrew Wilson, Domain chief economist. “Similar to other capitals,
Adelaide has experienced a flattening of prices growth, with future growth likely at a slower rate than in recent years.”
“The market was very stagnant,” confirms Eliza Owen, market analyst at OnTheHouse.com.au. “Adelaide houses grew a modest 3.75% in the year to March, but this is marginal considering that the median house is only worth $436,000.
“The fact is that the economy is not performing well. Unemployment has trended down markedly and is now just 5.7%, but participation has also fallen … if the people giving up the job search are no longer counted as a part of the labour force, the unemployment rate will shrink without people gaining more jobs. Furthermore, the nature of jobs secured in the economy is becoming more precarious. This is signalled by historically low wage growth, which was just 2.2% in the year to 2015.”
Nonetheless, unit prices remained consistent during this period, and of all the Australian capitals only Adelaide did not report a price drop. Rather, over the past 12 months the capital reported price increases of 2.2% and 3.4% for units and houses, respectively.
Adelaide-based French firm DCNS recently won a contract for a large submarine-building project, wrote Paul Starick, chief reporter at The Advertiser
, in an article published in April on NTNews.com.au. This could potentially generate many jobs and help improve SA’s economy and property market. And according to REA Group chief economist Nerida Conisbee, a proposal has been made to include funds for housing and the expansion of public transport in the federal budget, thus boosting investment.
She adds that investment activity, especially in the apartment market, remains high, especially with the influx of overseas buyers. Chinese investors are particularly interested in this market, despite the overall decline in such activity throughout the country.
“Consumer sentiment remains more optimistic than pessimistic,” Conisbee says. As long as there is no negative gearing, growth should continue to be slow and steady.
Greg Troughton, CEO of REISA, stated in an article in The Advertiser Real Estate
that, despite the region’s poor performance this quarter, both local and interstate buyers considered properties in Adelaide to be value for money. Moreover, according to The Advertiser Real Estate
reporter Tom Dougherty, the auction market is strong, recording a clearance rate of 63.6% in the first week of April, with a further increase in the following week.
RealEstate.com.au blogger Sarah Millar says SA has a tendency to feature in the top 10 suburbs of the site’s Top Sellers Markets, which implies the state is still desirable. In fact, three Adelaide suburbs were featured in the top 10 hotspots for houses, while one suburb, Norwood, also made the equivalent list for units.
The metro areas displayed more growth than regional areas, Owen reports in her April market update. The rental rate for houses in Adelaide rose by 1.33% to $380, whereas the rate in the country was maintained at $270. The metropolitan suburb of College Park has a strong housing market and the second-highest median price in SA. Over the past 12 months, this area showed 50% growth, up from 44% growth three years ago but down from 85% growth five years previously. College Park also reported a quarterly growth rate of 28%, the second highest in SA and eighth in the entire nation. Furthermore, its vacancy rate is a rather low 1.1%, likely due to the presence of the many educational institutions that give this suburb its name.
In the unit market, however, rental rates increased by 6.67% in regional SA, while rates in Adelaide remained unchanged throughout the year. The inner-city suburb of Goodwood was the top performer, recording 48% growth over the past year. This continues a trend seen over the past five years.
Nonetheless, Conisbee advises that “in smaller cities apartment development should be viewed more carefully, particularly given there is generally less demand”. But she adds that a well-positioned apartment close to amenities such as shops, transport and universities should be a good investment. Goodwood certainly fulfils these requirements, and its location just south of the Royal Adelaide Showgrounds is also likely to help its economy.
SUBURB TO WATCH
North Haven: Desirable units in this seaside suburb
Just 18km northwest of Adelaide is the suburb of North Haven. Its western side is near the coast, and the sailing community makes up a large proportion of its population.
“The area currently offers young families affordable entry-level buying in what is a highly sought-after community-inspired lifestyle,” says Kate Smith, principal at Raine & Horne Semaphore.
An indication of North Haven’s desirability is that the vacancy rate is a very low 0.9%, having dropped 0.4% from the previous year. The unit market saw slightly stronger growth (1.5%) than the housing market (1.4%). Units also generate a high rental yield of 4.8% and may represent an excellent investment opportunity.
“Locals favour marina-side homes generally in family-friendly cul-de-sacs. We have quality schooling and great access to public transport,” Smith continues. “The local government has also just announced the ASC submarine contract, which will be a terrific boost to the area and to the Lefevre peninsula for the year ahead.”
Smith notes that North Haven offers family homes with three to four bedrooms and generally two bathrooms on large allotments. Given the popularity of sailing as a town activity, residents can join either of two yacht clubs in the area. Trains, trams and buses are the available public transport options.
While North Haven’s growth has been slow, this growth trend may continue in the near future, especially in the unit market.
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