The Adelaide property market has stalled, but a government commitment to infrastructure, coupled with multiple mining ventures, is providing cause for optimism

It has been a quiet news month for Adelaide’s property market, but government projects already up and running are maintaining investor anticipation of good times ahead.

“We’re hoping that 2012 is the year South Australia begins its economic transformation from a declining manufacturing base to a resources powerhouse,” says Nathan Paine, executive director of the SA Property Council. “The recently signed Indenture Agreement between the state government and BHP Billiton brought the Olympic Dam expansion one step closer and this triggered a rebound in confidence in the property industry.”

The improved sentiment was reflected in the recent Property Industry Confidence Survey, which showed confidence had bounced back from a negative figure of 99 index points in September, to place South Australia among the ranks of other resource states with 105 points in December.

Paine says businesses have also responded well to the Olympic Dam expansion.

“The Property Council’s Office Market Report figures for January 2012 show the vacancy rate in the CBD office market fell by 0.1 percentage points to 7.7%,” he says.

“These figures demonstrate that South Australian businesses are in a ‘holding pattern’, seeking to balance their concerns for international economic conditions against mounting confidence in an Olympic Dam-inspired boom.”

Paine says ongoing efforts by the state government to improve the Adelaide city area will fuel commercial growth.

“The government is determined to rejuvenate Adelaide’s CBD. Strong investment in the city centre’s public realm and infrastructure will bolster commercial values and improve investment profiles,” he says.

Angelo Mena, managing director of Adelaide Property Finders, believes the Olympic Dam expansion will be complemented by other mining ventures across the state.

“Whatever you think about the Rann Government, I think they did some great things,” says Mena. “One of those was putting a lot of effort into identifying new mining opportunities. We have had the opportunities here for thousands of years, but now that they’re identifying them, we finally have an industry.

“Royalties will eventually start pouring into the state, just like they did in Western Australia. That, together with defence, infrastructure and population, puts a lot of upward pressure on property prices in a traditionally conservative city like Adelaide.”

Full steam ahead for the coast

The Seaford Railway extension, currently underway and expected to be finished in 2013, will bring greater access to the coastal areas from Adelaide’s south. In addition, the duplication of the Southern Expressway will make the same areas more accessible by road, and is due for completion in 2014.

Mena believes that these projects will make already desirable suburbs such as Christies Beach and Seaford even more competitive.

“I have been keen on these southern areas for a while. The volume of infrastructure going into that area compared to the amount of land being released will really improve their value,” he says.

“They are making a big effort to get transport down to those parts, but they’re hardly releasing any land. The only reason for that is the geography; it’s very hilly, it’s landlocked between the hills and the sea and you can’t really build onto the hill space.”

Mena says the government introduced policies late in 2011 to allow more subdivision in the region, prompting people to buy up land, knowing that any new houses will come from that area.

Development holds the Quay

Mena says many investors have lost faith in the Port Adelaide area, but he is still expecting it to come good. He believes future projects and current fundamentals will allow this to happen.

One such project is the Newport Quay development, which aims to transfer some of Port Adelaide’s industrial wasteland into a residential and retail district. The second of five stages of the project had been completed when environmental issues brought it to a temporary halt.

“When they started the site, four or five years ago, they put in all these units and flooded the market,” says Mena. “Once it stalled, a glut of these properties came off the market.”

Mena believes that once the project gets back underway, it will vastly improve the area, but in the meantime, Port Adelaide has other growth drivers that need to be activated.

“The government is talking about installing a tramline from the city down to Port Adelaide, so if they do, that’s one bonus,” Mena says.

“Regardless, Techport Australia is going to build all its submarines about 5km away, which is worth billions. Then, just over 1km away, you have the beautiful beaches of Semaphore, on the western side of the Le Fevre Peninsula. Anywhere on that side is a really smart place to buy, plus the land you can get there is quite cheap and some of it is divisible.

“I see some real potential there. It’s hard to believe that this area won’t come good eventually.”