Adelaide market cools
Over the September 2016 quarter, house and unit prices dropped by 0.3% and 1.3% respectively in the Adelaide market. While this is the first decline for the house market in six straight quarters, it is the second consecutive dip and greatest decrease for the unit market in three years.
While this isn’t the most positive news for investors, it could represent a strong opportunity for buyers to gain entry into the Adelaide property scene.
“The price fall this quarter shows great potential for first time buyers. If you’re hunting for a bargain, it’s a great time to enter the affordable Adelaide market,” says Andrew Wilson, chief economist at Domain Group.
Investors can also get in on the action as Wilson expects prices to rise again, making investment in Adelaide ideal for those seeking long-term capital gains.
“Despite an underperforming local economy, house price growth in Adelaide has proved resilient and looks likely to resume … reflecting recent strong results of the spring auction market,” Wilson explains.
Economic downturn threatens property market
ABS data indicates that over the 2015–16 financial year, SA has seen many departing residents, leading to a struggling economy and low demand.
“Not only is South Australia’s ‘brain drain’ a real threat, but when combined with our state’s low population growth rate and an ageing population, these problems are compounded,” says Daniel Gannon, executive director of Property Council SA.
Gannon says many of these young migrants are motivated by the desire for a different lifestyle and for employment opportunities. “We also know that many of these young South Australians return to our state at a point in the future, and they return with greater knowledge and refined skills, which is a benefit to our economy,” he says.
“However, what we don’t know is the extent of this return voyage and whether it offsets the initial interstate migration.”
The declining levels of confidence in the state’s property market may be another factor contributing to the tendency of SA locals to leave. “This is an issue about reliability, credibility and confidence. It’s not about politics, it’s about learning from what happened and ensuring we are better prepared for the future,” Gannon concludes.
“This should also serve to inform governments about the importance of building resilience into our cities and infrastructure.”
City suburbs stand out
In terms of housing types, Gregg Harris, general manager of NAB Retail, confirms that detached houses have been performing strongly over the 12 months leading up to October 2016.
He highlights the inner-city suburb of Mile End as a top prospect because it is just 2km from the CBD, while being close to a beach. This suburb is also highly accessible as it is connected to several roads and served by public transport.
Meanwhile, Norwood is presently regarded as SA’s most popular suburb, and demand is rising to the point where supply can no longer keep up.
According to the Property Demand Index published by REA Group, this suburb was the most searched-for suburb on RealEstate.com.au.
“The eastern suburbs are a hotspot for property buyers as they offer some of the state’s premier properties,” Harris explains.
In addition, areas along major roads are seeing some zoning changes, which inspire higher-density developments. Herron Todd White notes in its Month in Review for November 2016 that there are many properties with redevelopment potential throughout the city.
“The development site market is currently positive particularly given the lack of supply in some areas. That can result in a premium price being paid,” the report states.
SUBURB TO WATCH
Rostrevor: Adelaide suburb defies property market trend
Located 10km northeast of Adelaide, the suburb of Rostrevor is countering Adelaide’s cooling trend.
Named after a village in Northern Ireland, this suburb has reported growth throughout its property market. Median house prices have risen by 7.7%, and unit prices have shot up by a whopping 13.4%. Furthermore, the average rental yields are high, at 4% for houses and 5.2% for units. Thus, this market is likely to attract investors.
Rostrevor is just minutes away from the Adelaide CBD, making it ideal for those working in the city. Buses run to and from the city daily, so commuting is convenient.
The Morialta Conservation Park is nearby, and has many nature trails for Rostrevor locals to hike. The suburb also offers lovely views of the city from its position near the hills. Residents may even be lucky enough to spot koalas in the trees.
Several good schools are located in Rostrevor, including Rostrevor College. Nearby Campbelltown provides shopping options 10 minutes’ drive away.
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