A study in resilience
Adelaide’s property markets have remained robust across the board, despite its economic travails. Here’s why
If you look at the numbers alone, the indicators suggest that Adelaide’s property market should be tanking. South Australia is far from an economic powerhouse – indeed, it’s often regarded as the worst-performing mainland economy, with unemployment nudging 8%, according to the latest ABS data.
One would expect the August CoreLogic RP Data figures to reveal a slide in values on par with that of western neighbour Perth
. Instead they reveal that values are holding firm.
Over the three months leading up to 31 August 2015 – the traditional ‘winter lull’ for property markets – Adelaide’s overall dwelling price decreased by the smallest of margins (0.1%), with unit prices actually increasing by 1.9%.
Growth between September 2014 and August 2015, meanwhile, stands at 0.5% for all dwellings, 0.3% for houses and 2% for units. The median dwelling price is now $405,000, making Adelaide the most affordable mainland capital.
Sure, it’s not spectacular growth – indeed, it’s less than the inflation rate – but when values in cities like Perth and Darwin
are tumbling, Adelaide looks steady in comparison. But why?
Steady as she goes
If anything, it’s because of the relatively sleepy nature of the Adelaide property market, which has been little influenced by external factors such as the resources boom and bust and the variations in interest rates.
The peaks and troughs of the Adelaide property market are often smoother than those elsewhere, making for a slower-growing but less volatile market.
Domain chief economist Andrew Wilson says Adelaide is “remarkably resilient”.
“Adelaide has suffered from a number of factors, not least the loss of the car manufacturing industry,” he says. “Even so, the housing market’s showing moderate prices growth despite those economic constraints.
“Those economic constraints have certainly made themselves felt in the north of the city out to Elizabeth,” he adds. “There’s no doubt that high levels of unemployment and economic insecurity are affecting those markets.”
Wilson pinpoints the higher-priced end of the market as a solid performer, citing a general perception of good value as an influence that has seen buying continue.
Wilson is positive about Adelaide’s prospects as the chilly winter turns to spring. The approval of major new submarine manufacturing and infrastructure spending should help lift the market, he comments.
“Adelaide had quite a good clearance rate for August, and the prospects are good for moderate growth,” he says. “I think that prices growth will be higher than last year.”
Valuer Herron Todd White’s (HTW’s) latest Month in Review
indicates that development potential may also be part of the reason.
“There are large parts of Campbelltown have been rezoned for medium density housing,” it says.
“Areas such as the inner western suburbs including Seaton, Brompton and Bowden, and suburbs surrounding the airport are all undergoing urban renewal to some degree.”
Houses built between the 1950s and 1970s in middle-ring suburbs are particularly prized by developers, says the report.
“The tendency is to now look to fitting two or three dwellings on a site that formerly accommodated a single residence. Competition for these sites is fierce.”
While both Wilson and HTW are wary of the ailing suburbs to the north of the CBD – Elizabeth and its neighbours in particular – property researcher John Lindeman takes a different view.
“Salisbury and Elizabeth are very interesting,” says Lindeman. “Prices have hit rock bottom and you can buy a house for less than $200,000.”
Lindeman points out that, even with “very affordable” rents, an investor can still secure a 6% yield from these properties.
“That provides great cash flow,” he adds. “Medium- to long-term price growth may also be on the cards, especially as more investors come looking for cash flow.”
This may be the case especially if banks start tightening lending criteria, as expected later this year.
For those seeking capital growth – modest as it may be – Wilson recommends sticking to middle-range suburbs in the east, west and south.
“There’s a lot of value in the market, and you can still get properties in the $400,000 to $500,000 price range near the CBD,” he says. “Adelaide’s ultimately a low-rise city, and that’s part of the story as to why the market is quite resilient.”
SUBURB TO WATCH
- Market conditions: Steady, with prospects for low-to-moderate growth
- Segments to watch: High-yield ‘bargain’ suburbs; middle-ring suburbs with development potential
- Segments to avoid: Northern suburbs, especially if you’re focusing on capital growth
- Potential hotspots: Salisbury, Elizabeth (for rental yield); Campbelltown, Seaton, Brompton and Bowden (for development potential)
Seaview Downs: Adelaide’s quiet achiever
As the name suggests, this suburb has some breathtaking water views. And if you’re looking for an affordable house that’s close to the beach and not too far from the city, look no further. Located 13km from the Adelaide CBD, Seaview Downs is a quiet suburb with big potential.
Some of the sought-after amenities nearby include Flinders
University, Flinders Medical Centre, Seacliff Beach and the O’Halloran Hill Recreation Park. It’s no wonder the suburb is a hit with families, professionals, seniors and students.
It is also just a short drive to Westfield Marion – the largest shopping complex in Adelaide – which is undergoing a $350m redevelopment over the next five years. This includes 65 shops across two levels, 10 restaurants and cafes, and more than 1,000 parking spaces.
And despite capital growth for houses rising by 7% in the past 12 months, the current supply and demand stats indicate there could be more growth underway in the near future. This includes the fact that there’s just 1.04% of stock on the market and a low vacancy rate of 1.63%, according to DSRdata.com.au.
There are houses with balconies and scenic water views on Murat Street. Three-bedroom houses there can be picked up for around the suburb’s median price. There are also houses on Fowler Street with lovely views and they have the added benefit of being very close to Seaview Downs Primary School. They may be more expensive than the median price but the great location justifies it.