SA revamps image, but will investors bite?
SA’s government is doing its best to make Adelaide a more attractive investment option, but is it working in the residential property market?
Often described as one of the “great small cities of the world”, Adelaide is no stranger to accolades. It is, for example, regularly rated one of the world’s most liveable cities.
Yet the state government itself concedes that the city has a bit of an image problem. Adelaide has long struggled with the perception that it is conservative, staid and slow-paced.
Having identified this as a problem, the state government is in the midst of an intensive revitalisation program. Known as the Vibrant City strategy, it aims to transform Adelaide into a city attractive to SA residents, as well as to potential visitors.
According to James Young, who is chief executive of Colliers International in SA, the strategy is also meant to make Adelaide more appealing to investors. There tend to be lower levels of demand for Adelaide than other capital cities, so demand does need to be encouraged, he says.
“This rejuvenation and rebranding is a very deliberate attempt to attract the investor market. To support this, the government has been proactive in doing things like, for example, introducing stamp duty concessions for buying into certain CBD projects.”
Adelaide’s new-style residential developments are designed to cater to the growing demand for two- to three-bedroom apartments and townhouses, as opposed to bungalows in the suburbs. The Bowden urban village in North Adelaide and the Tonsley industrial-residential complex are good examples of these lifestyle-focused developments.
Young says that, when combined with the drive to develop better services (like light rail) for inner-city living, the development involved with the Vibrant City program, and the SA affordability factor, these new property options should be of interest to investors.
The demand is out there, he believes. “We are seeing more interstate buyers looking genuinely at investing in Adelaide. This is largely because competition has increased dramatically in NSW and Vic, so investors are looking in SA as a result.”
Over the last three to five months, he has also observed growing numbers of past investors, who had moved their investments out of SA, coming back to have another look at the Adelaide market. “This is an exciting and positive trend.”
Resources sector primed for growth
Improving awareness of SA’s emerging resources sector, which is regarded as having a very bright future, is another factor piquing investor interest.
Young says that with the development of the resources sector will come tremendous investment and infrastructure spending. In turn, there will be job creation running from these projects over time. The economic impact of this for SA, and particularly Adelaide as the capital city, is set to be major.
“This should impact significantly on the capital growth of Adelaide property in the future. Adelaide, and SA generally, does have a very stable market. But I think residential property is set to enjoy an upside down the track.”
A measured recovery
The latest RP Data-Rismark Home Value Index results show that Adelaide, like most other capital cities, had a slight drop (of 1.8%) in values over May. However, it recorded growth of 1.6% over the quarter, and 4.3% growth over the year.
The latter figures are probably the ones to focus on. According to the latest Herron Todd White report, Adelaide’s residential property market continues its “fairly measured recovery”.
There are a number of positive indicators of this recovery, the report notes. For example:
- Increased buyer interest and enquiry has started to translate into a slow rise in sales transactions.
- Auction clearance rates have improved.
- Time (days) on market figures appear to be falling.
- Reduced vendor discounting has reduced.
- There has been a slight increase in confidence, despite some ongoing concerns about the economy and employment.
The report also states that recent RP Data figures show a median price increase of about 3.5% over the last year. This has left Adelaide’s market sitting at a level slightly higher than its last peak, which was towards the end of 2010.
Suburb to watch: Devon Park
Tiny Devon Park is an inner-northern suburb of Adelaide, just 4.6km from the CBD. Often overlooked, fans of the suburb believe it is an undiscovered inner-city gem.
Enjoying good public transport options due to its position beside a major railway line and a major arterial intersection, Devon Park has easy access to all major amenities. It is also within walking distance of schools and shops and, although small, has its own large, leafy park.
Tom Ladas, from Ray White Woodville, says unfortunately the suburb is often confused with the city’s Davoren Park, which doesn’t have a good reputation. “But, in fact, Devon Park is nothing like Davoren Park. Rather it is quiet and pleasant.”
Devon Park’s intimate community atmosphere means it has long been popular with families. However, its proximity to the CBD and affordability mean it is now becoming increasingly desirable to young professionals.
The suburb is largely made up of traditional-sized homes and blocks, with a sprinkling of newer townhouses, Ladas says. “Affordable prices across the board mean it has the convenience of North Adelaide without the price tag.”
It is worth noting that a draft residential development plan, currently under discussion, proposes some rezoning changes. These changes would allow for some medium-density residential development in the area.