Brighter future on the cards
Negative reports and perceptions aside, SA’s economy and capital city property market are set to improve in the not too distant future.
Perceptions about SA’s economy might well be hurting the property markets of both the state and its capital city more than the economic reality is.
Media focus on Holden’s closure announcement and its impact on the SA motor manufacturing industry has overshadowed coverage of all else relating to the SA economy in recent times. Buyer confidence and, thus, property market activity could suffer as a result.
Hotspotting’s Terry Ryder says he understands why many observers don’t expect much from the SA market. “It doesn’t have the economic oomph that other states have. So its performance has tended to be a bit below par and it gets downgraded by some commentators.”
Those commentators are not taking a long-term view of the state and its prospects. Rather they focus on events such as the impeding Holden closure.
But SA does have a strong future – with some big events in the pipeline – and will be taken a great deal more seriously in 3 to 5 years’ time, Ryder says. “The Holden closure will have some impact, but it will be absorbed. The real future of SA is in the emerging resources sector. When that really kicks into gear the benefits of it will flow back into Adelaide
in a big way.”
As an example, he cites the much-plagued Olympic Dam development. While the project may have been temporarily deferred due to the need for greater cost efficiencies, it will not be on hold forever. The potential benefits and profits are simply too big.
Ryder says that, once projects like Olympic Dam, are back underway SA will be on track to become one of the top resources states in Australia after Queensland and WA. Capital city Adelaide – and its property market - is set to be a major beneficiary of any such development activity.
Further, there are other emerging, growth industries and opportunities in the pipeline for the SA economy. These include defense hardware manufacturing, alternative energy, agribusiness, education and wine.
Capital property focus
In the meantime, Ryder believes that Adelaide’s property market is set to have its best year since 2009 over the coming year. “There should be solid growth. It won’t be a massive year, but there should be maybe 5 to 7% growth.”
One cause of this will be a ripple effect from improved markets in other capital cities (particularly Melbourne). The Adelaide market should follow suit as its cycle is overdue for improvement.
Also, Ryder says he has noticed increasing sales volumes in the city. “Rising sales lead to rising prices. We have seen a pattern in many Adelaide suburbs of risings sales over the last 15 months, and that means that we are likely to see some rising prices too.”
He adds that Adelaide’s ongoing affordability makes the city a good bet for canny investors. “It is too simplistic to say it doesn’t have great population and economic growth. There are some standout areas – like Onkaparinga in the city’s south - which investors should take note of.”
However, according to the latest APM Housing Market Report, Adelaide’s market remained relatively subdued over 2013 despite the stimulus of low interest rates.
The median house price increased by a moderate 3%, which was the first annual increase since 2010. This is just 3.4% below its previous peak, which is a good reflection of the relative stability of the market’s price cycle.
Adelaide continues to have the lowest median house price of all the mainland capitals at $446,153. This affordability translates into the highest levels of first home buyer activity of all the mainland capitals.
The report predicts that the city’s relatively high unemployment rate and weak economy will continue to subdue buyer activity during 2014, although prices should still increase by between 2% and 3%.
Adelaide rental affordability
Meanwhile, APM’s latest rental price report shows that Adelaide’s average weekly asking rent of $350 for houses and $285 for units makes it the most affordable mainland capital city for renters.
While these prices are particularly good for tenants, it seems that landlords are not missing out. According to the report, median prices in Adelaide were increasing, with rents rising 2.9% for houses and 1.8% for units over the December quarter.
Suburb to watch: Marleston
Fans of Marleston, which occupies just 1square km in the West Torrens LGA, describe the suburb as a hidden gem. Sadly for those fans, that secret status might soon dissipate – thanks to the recent opening of a Marleston TAFE campus.
While the area is largely residential, the new campus is set to be part of a $120 million training and manufacturing hub. It is expected that the development will have significant benefits for the surrounding neighbourhood.
Close to Adelaide’s CBD and bordered by the commercially-oriented Richmond Road, Marleston itself is largely residential. Its central location means there is easy access to all amenities from schools to shopping to eating out options.
There are a number of parks and sporting grounds in the suburb itself, and it is also just a short driving distance to several beaches. Richmond Road is a major bus route and a bus ride to the beach takes only 20 minutes.
These features have long made the suburb popular with families. However, the arrival of the TAFE campus hub should increase its desirability with the student demographic and improve an already steady rental market.
Character bungalows on mid to large sized blocks dominate the properties available in Marleston. While the beginning stages of gentrification mean that a fair amount of these bungalows have been renovated, many more are still awaiting transformation.
Alongside the bungalows, the suburb also features some newer, modern style properties built on subdivided blocks.
With a median house price of $437,500 and a median unit price of $352,000, property prices remain particularly affordable for such a central location.