South Australia’s economic woes continue

 

At best, only modest growth is on the horizon for SA, owing to the continuing decline of the state’s economy

 

Property values across Adelaide slipped by 0.5% over the past 12 months, reports the Property

Council of Australia – and unfortunately this sluggish growth trend is expected to continue for the foreseeable future. South Australia’s poor economic status is affecting both commercial and residential markets, especially in and around Adelaide.

 

According to the Herron Todd White Month in Review report for June 2016, the announcement that the Arrium mining company is under the control of administrators was received as “another blow to an already strained regional economy”.

 

“It has a significant destabilising affect throughout the state, which is still dealing with the continuing decline of the manufacturing sector,” Herron Todd White states.

 

HTW also notes that demand from first home buyers and investors is strong for affordable detached housing priced under $450,000 and located within 15km to 20km of the CBD, as does slightly more expensive, quality housing within 10km. Other popular areas include the beachside suburbs of Henley Beach and Grange.

 

However, the mood continues to be discouraging for the northern outlying suburbs in the Playford Council area, which are near Elizabeth and the Holden manufacturing plant slated for closure in 2017. A double whammy of property oversupply and looming unemployment are doing little to boost confidence.

 

The Rental Affordability Index also points out that the economic troubles in the north have increased affordability after several years of this area being untouchable. For instance, Morphettville, Marion and Mitchell Park saw rents taking a sharp dip during the previous quarter.

 

On the flip side, top chicken producer Ingham recently announced a proposal to double its SA operations, which would create an additional 850 direct and indirect jobs for the plant workers who are expected to be laid off. This move focuses on northern Adelaide and the Murraylands in particular.

 

Adelaide’s unit market falters

Within the CBD itself, older, lower-grade offices are slated for renovation into apartments, adding to two recently completed unit developments. The Housing Industry Association indicates that SA as a whole has reported the highest increase in home building approvals, at 13.7%. However, this market continues to be flat in terms of capital growth.

 

Greville Pabst, executive chairman of WBP Property Group, notes that Adelaide is now seeing a unit oversupply.

 

“In the city, Adelaide is experiencing an oversupply of both new and second-hand apartments. We expect the apartment market will follow the oversupply trend currently transpiring in Melbourne,” Pabst says.

 

That said, he adds that there is still a shortage of stock in Adelaide’s inner to middle suburbs, which continues to drive growth.

 

“Relative to other areas in Adelaide, market conditions remain weaker in the outer-northern mortgage belt suburbs, in part due to an oversupply in some areas, but also unemployment is a considerable factor in these areas,” Pabst says.

 

Indeed, median house prices in Adelaide have increased over the past year, and Pabst has an encouraging outlook for the city’s future.

 

“The forward outlook for Adelaide predicts stable growth in the metropolitan area,” he says.

 

Infrastructure projects may save the state

A number of new infrastructure projects are currently being executed in Adelaide, including the Torrens to Torrens project, the extension of the O-Bahn busway, and upgrades to Darlington roads.

 

“All of these projects will provide Adelaide with improved roads and infrastructure,” Herron Todd White reports.

 

“Given the continued urban sprawl, improved access to the city is a positive for property owners situated away from the CBD. The general effect these projects are likely to have on property prices will be evident once the projects are finished in the next couple of years.”

 

All eyes are on the Darlington Upgrade project, which is expected to make the CBD more accessible for suburbs south of Darlington as well as those who take the Southern Expressway.

 

 

SUBURB TO WATCH

Kidman Park: Well-located suburb on a consistent high

 

A suburb of the City of Charles Sturt, Kidman Park has been reporting reasonable growth thanks to its strategic location near both the Adelaide CBD and beaches. Thus it offers residents the conveniences and luxuries of both city living and seaside relaxation.

 

Values in the unit market in particular have increased by 7.1% over the past 12 months. Despite this, the average rental yield is still high, at 4.9%. The house market has been growing steadily for 10 years, suggesting the long-term capital growth potential of this area.

 

Kidman Park has a local primary school that has been operating since 1967. Residents have easy access to Collins Reserve for recreation. In addition, bicycle and walking trails have been established in Linear Park. Buses and trams are available for commuters headed to the capital.