The signs are crystal clear: Adelaide is on the rise. The locals have known this for a while and can give you anecdotal evidence of market rebound such as properties being sold as soon as they are listed and buyers paying well over the asking price.
Now the stats are reflecting this trend. Both CoreLogic RP Data and Domain recorded upbeat results for Adelaide in their latest reports.
During the April quarter, median house values rose by 2.2% to $420,000, according to CoreLogic RP Data. Adelaide outperformed its bigger counterparts such as Melbourne, Brisbane and Perth. Only Sydney and Darwin grew faster during the same period.
Domain reported similar results in its latest report, citing healthy growth of 1.6% during the March quarter.
“When auctioned properties are selling for higher than the asking price, you know that the market is heating up,” says the ‘property professor’, Peter Koulizos.
Being the most affordable mainland capital city, Adelaide is a logical destination for investors priced out of Sydney, Melbourne and Perth.
But despite the promising stats, a lot of interstate investors remain cautious about the Adelaide property market. And it’s for good reason. The economy is heavily dependent on manufacturing and there are no other major growth drivers.
However, Marissa Schulze, Adelaidebased mortgage broker and director of Rise High Financial Solutions, points out that property values in this city have grown on par with those in many suburbs in other major cities over the long term.
“People think that property values will not grow as much as interstate property values. The Adelaide property market is slow and steady, but over the long term we always see good growth,” says Schulze. “Historically, Adelaide has followed the long-established trend of house prices doubling every seven to 10 years. Adelaide can also offer investors positively geared properties for under $200k in suburbs within 20–30km of the CBD. You can still buy great family homes on large blocks of land for under $400k within 5–10km of the CBD.”
So, seeing that things are looking up in Adelaide, where should you look to maximise your profit in this
Peter Koulizos, property professor and author, tipped the following suburbs for making the biggest profits.
Marissa Schulze: Where I would be buying right now
Located just 7km from the Adelaide CBD, this suburb offers many affordable housing options. You can still buy a three-bedroom house on a large block of land for under $400,000.
While there are still some old housing trust homes in the area, it has been getting a major facelift over the last few years, as many developers are knocking down old, rundown houses and subdividing and building brand new ones.
The local councils and state government are also spending huge amounts of money on improving Churchill and Prospect Roads, with upgraded roads, footpaths, improved streetscapes and infrastructure. There is also a lot of private money going into these areas, with new shopping centres opening up; new, trendy cafes and restaurants; and recently a new Costco.
Northwestern city fringe
This area includes all the suburbs between Churchill Road, Regency Road, Port Road and Park Terrace, for example Renown Park, Ridleyton, Devon Park, Croydon Park and Croydon.
These suburbs are less than 5km from the CBD and present a great opportunity for investors as they are significantly cheaper than neighbouring suburbs such as Prospect, Ovingham,Fitzroy and North Adelaide.
The government has recently spent lots of money upgrading transport, and offers free tram rides from the corner of Port Road and Park Terrace through the CBD.
Houses here are still very affordable. You can buy a three-bedroom home in Renown Park on over 700sqm for under $400,000. Rental returns are good, and it is easy to find good tenants due to the convenience of the best transport options Adelaide has to offer, combined with all of the trendy new cafes and restaurants and shops opening up.
Considering that properties in these suburbs are only 1.5km away from North Adelaide, where more than $1m would be asked for similar-sized properties, there is plenty of scope for capital growth here, as well as good subdivision and development opportunities if this interests you.
Located approximately 30km north of the CBD, this area includes the suburbs of Elizabeth North, Davoren Park, Smithfield and Salisbury.
While these suburbs are a little rough around the edges and are in the lower socio-economic bracket, the numbers on properties in this area make sense for investors. You can still buy three-bedroom homes on land parcels greaterthan 800sqm in size for less than $180,000, and if you want something even cheaper you can pick up a semi-detached house for under $160,000 if you look hard.
In these areas you can get a 6–7% rental return, which makes your investment positive or cash flow neutral at least. People worry that these suburbs will not attract capital growth, but properties that are now selling for $200,000 were selling for about $60,000 in 2001–2, representing 233% capital growth in 13 years (not a bad return on investment!).
These suburbs will always grow because of the attractive rental returns. There will always be a demand for affordable housing, and you will never have a shortage of tenants in these areas. It is also such an easy entry point into the property market, allowing you to pick up an investment property with as little as $16–20k as a deposit.
This is a more expensive suburb on the southern city fringe that is all about capital growth potential. Your rental returns are going to be much lower in Parkside than in the first three areas described above, but there are great capital growth opportunities in this trendy, sought-after suburb that is surrounded by the much more expensive suburbs of Unley Park and Hyde Park.
With small units selling for less than $400,000 and beautiful traditional homes for under $800,000, Parkside is still considered affordable and is walking distance from the CBD, trendy King William Street, Hutt Street and Unley Road.
There are several highly respected private and public schools and plenty of beautiful parks in Parkside. This suburb has also recently been named one of the most highly searched areas on RealEstate.com.au, showing that it is a popular option for locals. This investment option is only for the investor who has strong cash flow and is looking for negative gearing and capital growth.
If I had $500,000, where and what would I buy?
I recently purchased two sets of two semidetached houses (ie four three-bedroom houses) in the northern suburbs for less than $500,000. This gives me large land parcels that can be developed in the future if I ever want to, but more importantly these investments are great for cash flow as they offer more than 9% rental return. These are the sorts of investments you can afford to hold forever, and I have no doubt the capital growth will come. So if you had $500,000 I would recommend buying at least two properties with this money, and spreading your risk and managing your cash flow by purchasing properties with a high rental return.