Affordable market has plenty to offer
SA’s economy may be struggling, but there are still good reasons to invest there. There are also great opportunities outside of Adelaide
The best thing about investing in SA? You can buy a property close to the beach for a reasonable price with good rental returns, says Prue Muirhead, Your Investment Property
magazine’s Investor of the Year 2009 and director of Muirhead Property Management.
That’s very hard to argue with. Take O’Sullivan Beach, for example. That suburb is just 24km from the Adelaide CBD and has many properties with beautiful beach views. The median price? A measly $281,750, according to CoreLogic RP Data, with 6% rental returns to boot.
Investors are already starting to catch on to these kinds of opportunities.
Strong demand in O’Sullivan Beach is reflected in the 60 days that houses spend on the market (a great figure for Adelaide), and the fact that the vacancy rate is just 0.62%.
There are similar opportunities available in nearby Christies Beach and Noarlunga Downs.
“We have found renting properties in our beautiful state is incredibly easy,” says Muirhead.
“Most properties are rented within the first 10 days, which means the returns on your investment are higher, as there is less vacancy.”
Muirhead’s advice to investors is to be careful with furnishings if you are targeting families as tenants.
“If you choose to furnish your rental property for better returns, only furnish a one- or two-bedroom unit, unless the property is an executive or holiday rental, as demand for a furnished family home is minimal,” she says.
Threats to the property market
One danger for capital growth prospects is that SA’s waning economy will increasingly impact on the housing market. This includes the declining car manufacturing sector, uncertainty about what will replace existing defence manufacturing projects nearing completion, and the probability that submarine work will be moved overseas.
“Population growth is another source of weakness, remaining well below national rates,” says the most recent Deloitte Access Economics Business Outlook
Moreover, the state has been lacking in job growth over the past year, as unemployment in SA is the highest in the nation.
On the positive side, the fall in the interest rate and exchange rate is helping certain sectors of the SA economy, including farming, tourism and manufacturing.
“While Deloitte Access Economics maintains our view that South Australia will be a relatively slow growth market in the next handful of years, over the long term South Australia is relatively well positioned to sell into Asia’s maturing boom,” says the report.
Potential in Port Lincoln and Whyalla
A great way to sum up Port Lincoln is that it’s a good, solid regional town, says Terry Ryder, director of Hotspotting.com.au.
“It benefits a bit from the resources sector, but it’s got other things, such as a big fishing industry,” he says.
Indeed, it claims to be the ‘Seafood Capital of Australia’ and is the home of Australia’s largest commercial fishing fleet.
Property prices in Lincoln currently sit at $312,000 for houses and $225,000 for units.
According to Real Estate Investar, demand is already tight in Port Lincoln, as it has a healthy vacancy rate of 1.81%.
Ryder says another well-known SA regional centre, Whyalla, is disadvantaged by the fact that much of its economy is related to the mining industry.
“It has been quite a good performer over the years, but right now it’s looking a bit pale because of its resource sector,” Ryder says. “It’s iron ore primarily in that area, and when it is strong, Whyalla is strong. But at the moment it’s not so good.
“I think Whyalla has a good future, though.”
In April, QantasLink began new daily flights to Whyalla, which can provide 1,300 seats a week between Adelaide and Whyalla. It’s part of the Whyalla City Council’s $3m airport upgrade that hopes to further boost regional tourism.
SUBURB TO WATCH
Unley: Popular suburb satisfies everyone
Situated just 3km from the Adelaide CBD, Unley is one of the city’s more affluent suburbs. However, it caters for a wide demographic, including professionals, families, students and retirees.
It’s logical then that there are a range of homes in this suburb, including small cottages, large family homes and modern executive townhouses.
It is also known as a multicultural suburb, with a variety of international eateries located in the commercial precinct.
Families are particularly drawn to the clean and quiet tree-lined streets and the beautiful parks.
Unley Road offers a great variety of shops and dining options. For everything else, the Adelaide CBD is just a few minutes away by car. Additionally, there are frequent buses that can take residents right to the heart of the city.
As prices have only grown by 2.8% in the past 12 months, investors have a chance to buy before bigger growth spurts are experienced in the coming years. OnTheHouse.com.au forecasts 4% growth per annum for units over the next eight years.
At a median unit price of $399,500, the suburb is not overly expensive. For around that price you can pick up a modern two-bedroom unit on King William Road.
There are units on Fairford Street and King William Road that are highly sought after due to their proximity to the best of Unley’s amenities, including all the action on Unley Road. They are also close to some of the best schools in Adelaide.