With South Australia’s resource projects beginning to ramp up, could Adelaide lead the charge for Australia’s property comeback?
Adelaide is certainly one to keep an eye on, says APM senior economist Andrew Wilson. One of the main factors that it’s got going for it is its slew of mining projects that, unlike WA’s, aren’t too remote from the state capital.
“Adelaide might be a bit of a dark horse going forward, because there are very large mining projects and it doesn’t have the geographical dislocation that WA does, so they’re not restricted to the fly-in, fly-out model so much,” he says.
“Worker accommodation in terms of owner occupation occurs at a greater rate in Adelaide than it does in WA, which has the fly-in, fly-out situation, so it might just take the mantle from WA. Certainly not in volume, but in terms of it starting to see some positive effects in the housing market from that economic growth.”
He suggests that as the year draws to a close, Adelaide will dust itself off quicker than other state capitals, thanks to the economic activity going on in and around the City of Churches. Not only is significant mining wealth expected to flow into Roxby Downs and the Eyre Peninsula, but Adelaide itself is going through major infrastructure changes.
High up on the list of projects to keep an eye on is the construction of the new Adelaide Royal Hospital, which local property author and academic Peter Koulizos says will stimulate the property market in nearby suburbs.
He points out that, while the better-paid medical specialists who work regular hours will be heading to some of Adelaide’s most prestigious suburbs in the east, shift workers will want to live in close proximity to the new hospital.
“If you wanted to capitalise on the fact that we’re having a brand new hospital built in the north-western end of the city, then suburbs like Hindmarsh, Thebarton, Torrensville and Mile End will do very well, I think, because they are virtually within walking distance of the hospital,” he says.
The project’s budget has recently been blown out from $1.7bn to $2.1bn, which caused quite an uproar in South Australian political circles, but Koulizos sees no reason for property investors to worry about delays.
“In reality it’s not going to cause any delays at all. I go past the site almost every day and there’s something new happening on a daily basis, so it’s certainly coming up from the ground as we speak,” he says.
And while the hospital isn’t due for completion until 2016, Koulizos points out that those suburbs that are set to benefit from what the state government is billing as Australia’s most advanced health facility are already strong investment areas.
“I’d pick those areas anyway because they’re your classic inner-city suburbs that are undergoing gentrification. In my opinion they’re undervalued. Plus you’ve got the new tramline, which has been there less than 12 months, which is provoking interest in those areas,” he explains.
Another major project that will benefit these areas, as well as North Adelaide, is the redevelopment of the riverbank area. This includes upgrading the Adelaide Oval to accommodate AFL matches, the expansion of the conference centre and casino and the upgrading of the festival theatre.
“They’re upgrading what they’re calling the new riverbank precinct and that will be huge,” says Koulizos. “The riverbank in Adelaide is like Southbank
in Melbourne, and the South Bank in Brisbane, so it will just activate a lot of the spaces in and around that location.”
And the proposed 2,400-home Bowden Urban Village (BUV) project, which is set to fill the old Clipsal and Origin Energy site between Park Terrace and Chief Street, is another major development to keep an eye on.
The project is still in the planning stages, but the government’s Land Management Corporation (LMC) is certainly being ambitious with its plans. Intended to be what the LMC calls a “model Transit Oriented Development”, the 16-hectare BUV site aims to be the paradigm of walkable, high density, sustainable inner-city living with a mixture of residential, retail and commercial property.
Koulizos points out that the project is still at the soil testing stage, but one exciting development is that the train line that currently runs through the middle of the site could be transferred underground.
“If you put it underground, a bit like they’ve done in Northbridge in Perth, then that can make it a very attractive area,” he says. “You have all the benefits of being close to a train station, but none of the negatives. But that’s going to require a lot of federal and state government funding, because it’s a very expensive project.”
Until South Australia’s mining and infrastructure projects come to fruition, however, RP Data senior research analyst Cameron Kusher isn’t quite so bullish about the state’s growth prospects. While he doesn’t think a crash is around the corner, he’s quick to flag up RP Data’s latest yearly growth figures for Adelaide of -2.2% for units and -2% for houses.
“I think we’re seeing a bit of a slowdown in that market,” he says. “I don’t think it’s going to be to the same extent that Brisbane and Perth have slowed, but I don’t expect a lot of activity in Adelaide over the next 12 months or so.”
The South Australian Centre for Economic Studies, however, has predicted that the state’s economy will grow by around 3% during the 2011/12 financial year, bringing South Australia’s economic growth level back to its long-term average.
Investors will therefore be hopeful that Adelaide’s property market will start to make its comeback next year as the state’s economy builds up steam.