SA Excerpt from the 2012 May Market report

By Nila Sweeney | 16 May 2012

Adelaide has had a slight change of character as the affordability that once defined it as a market shows signs of falling

Long hailed as Australia’s most affordable mainland property market, Adelaide has more recently got a sour taste of the wooden spoon.

While the city continues to be arguably the most affordable capital city market outside of Hobart, it holds the rare distinction of being the only capital city where affordability deteriorated over the last quarter. All other capital cities saw slight improvements in affordability.

This is according to a Housing Industry Association study that shows Adelaide is at risk of losing its crown in the affordability stakes.

The report indicates that despite interest rate cuts over November and December, the gap between the average cost of property and average wages has widened in Adelaide.

Evidence of this is that the cost of maintaining a standard loan has risen by almost $100 a month over the last three months. This is at a time when cuts in required payments have occurred in Brisbane, Perth, Sydney and Melbourne.

A debate brooding

The anomaly has so frightened observers that opposition housing spokesperson John Gardiner has labelled it a sign that “Adelaide housing is getting further out of reach as the cost of living increases across the board”.

Real Estate Institute of South Australia president Greg Moulden believes the situation has been blown out of proportion.

“Affordability has been so strong in Adelaide that I’d say it’s hardly surprising that affordability didn’t improve even though it did in other cities. We haven’t had the same sharp increases or falls that have characterised other markets. Things happen in South Australia at a much steadier pace. It’s just how our market works,” he says.

A greater concern in Moulden’s eyes is confidence. While buying activity and prices growth hint that a bottoming out may be occurring in South Australian property markets, confidence remains a missing ingredient.

“At the moment, the feeling about the South Australian market is not that good, but it’s fair to say that a lot of this has to do with what is happening overseas and in the global economy as a whole.

“For things to come off the bottom in a big way, the market needs to see confidence levels improve. That’s what’s missing.”

Room for development

As stakeholders in the property market grapple with each other over affordability issues, Brett Williams, director of urban development consultancy Brock Urban Projects, says a pressing and long-standing issue remains South Australia’s land tax regulations, which he says is hindering development.

“We have a situation in the state where the current Multiple Land Holding Tax is creating a rather cyclical pattern,” he says. “Under the law, every $1,000 in extra value of property you hold requires you to pay a higher rate of tax. This means you’re not taxed by the same amount for each allotment.

“As a developer, if you’re stuck with too many titles you pay an ever-increasing amount of tax. It’s a very significant imposition on our development industry. It’s making a lot of would-be developers question South Australia as a destination for their projects.”

Because land tax is determined on June 30 every year, Williams adds that a situation is occurring where developers are very active in January and February, but halter activity in the months leading up to June in a bid to reduce their tax burdens for the year.

“Developers don’t want to be caught owning too many blocks by June 30 or risk paying more in Multiple Land Holding Tax. The result is that there is a very quiet season before June and then a sudden release of new developments onto the market afterwards.”

At the REIQ, Moulden is hopeful that the situation can change. “It’s something we are constantly having a talk with the state government about. We believe that it is certainly having an impact on how many people are buying additional investments in this state.”

Top Suburbs : springwood , willliamstown , upper kedron , st kilda west , murdoch


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