It’s a buyers market… and a renter’s one, too
Buyers aren’t the only ones calling the shots in South Australia, where easing vacancy rates are giving tenants the pick of the bunch
It’s certainly a far cry from 2010, when Adelaide’s vacancy rates slipped below 1% and tenants struggled to find accommodation.
Now, landlords throughout South Australia are at the mercy of a picky renting public, as vacancy rates have settled in at 3–4% across the state – and they don’t look set to retract any time in the near future.
Back in August 2010, Real Estate
Institute of South Australia (REISA) figures showed that Adelaide’s eastern suburbs – classified as suburbs east of the city square between Payneham and Glen Osmond roads – had the tightest rental market of all at just 0.5%, while metropolitan Adelaide was sitting at 0.8%.
In the December 2012 quarter, Adelaide recorded a vacancy rate of 3.1%, while regional SA recorded a vacancy rate of 3.7%.
Agents report that properties are taking four to six weeks to lease in many situations, and tenants are being particularly price sensitive.
“Property managers across the state are consistently highlighting that the rental market is responding slower to filling vacancies, and tenants are often only responding when the price meets the local market,” confirms REISA president Greg Moulton. “We’ve really seen price to be a major factor in tenants’ decisions, and as there are slightly more properties available for lease, the tension between vacancy and price has eased.”
Have grants boosted buyer activity?
Changes to state housing grants in South Australia were introduced late last year to stimulate the property market, allowing for almost everyone building or buying a new home to be eligible for State Government assistance.
As of October 15 last year, any property buyers in Adelaide – including investors – who buy or build a brand new home priced at up to $400,000 can access the $8,500 Housing Construction Grant (HCG), provided the contract is entered into by 30 June 2013 (visit www.nobettertime.com.au for more details).
When the First Home Owners Grant and stamp duty savings are added in, first home buyers are actually eligible for up to $40,000 in grants and savings.
The stimulus seems to be working, with Moulten confirming that sales increased in the second half of 2012, with time on the market also reduced. “Two to three years ago, our market was flying. We had very, very strong growth,” he says. “Over the next couple of years it took vendors a long time to rationalise that the market had come down, but I think the public has come to terms with it now. People who bought at the high point in the last two or three years are struggling, but property is a long-term investment and vendors who have had their properties for longer than, say, five to seven years will still do well.”
Moulten categorises Adelaide as “a very attractive buyer’s market” at present and says investors who have an eye subdividing or developing should pay special attention, as “the market is starting to wake up again”. There are some fantastic opportunities out there, but you’ve got to be very careful when it comes to the purchase price,” he adds.
It’s a sentiment echoed by property valuer Greville Pabst, CEO of the WBP Property Group, who says the key to success in this market is investing in good-quality properties at under-market prices.
“Property has become an increasingly complex investment vehicle and is no longer a simple prospect for the novice investor,” he says.
“Not all property will perform in the same way in 2013, and buyers need to be informed and aware of this, to ensure they understand the capital growth drivers that make a good investment property.”
Unfashionable suburbs in favour
If you are looking for long-term growth prospects in 2013, then it may pay to turn your attention away from high-profile locations in favour of less trendy but more in-demand “unfashionable suburbs”, suggests Angus Raine, CEO of Raine and Horne. “An ‘unfashionable suburb’ that enjoys proximity to high-quality facilities such as schools, shopping precincts, business districts, plus excellent transport and road systems, could prove the next big thing,” he explains. “We’ve seen it all before with suburbs such as Semaphore in Adelaide’s west, which experienced a 40% increase in property sales in the June quarter last year.” The rise of Semaphore is “undoubtedly linked to its median sale price of $535,000, which makes it a more affordable alternative compared to other prestigious seaside suburbs such as Henley Beach ($605,000) or Grange ($577,000)”, Raine adds. Look for high-performing neighbourhoods and seek out adjacent, lower-priced suburbs for bargain buys, being careful to do your due diligence to ensure that the fundamentals of the cheaper suburb also stack up.
Situated directly south of Adelaide’s CBD, Goodwood has experienced phenomenal capital growth of 28% in the last 12 months.
Gavin Langridge of GP Langridge Real Estate says he is not surprised that the suburb, which boasts a unique village atmosphere, is performing well. “Like a lot of inner suburbs of Adelaide, the demand is good but supply is limited, and whilst we’re in a buyer’s market, it’s a market that is well received as it is so close to the city,” he says.
“Clearly, its proximity to the CBD is the suburb’s best attribute, although it’s still relatively affordable compared to other Adelaide suburbs.”
The vibrant suburb has a strong sense of community, with the Royal Adelaide Showgrounds next door and plenty of shops, businesses, and Goodwood Primary School along Goodwood Road.
“There’s also the local markets on the weekend, and we’ve got the Goodwood Hotel (known locally as ‘the Goody’). It has a great community spirit,” Langridge adds.
With an average weekly rental of $300, the suburb is popular with homeowners and renters alike. Demand is strongest for maisonettes, townhouses and properties on slightly smaller allotments, as are character homes and single-fronted cottages. “Anything that’s a reasonable-sized home, but perhaps on a smaller allotment and therefore cheaper, is what people are seeking out,” Langridge says.