Adelaide enjoys moderate growth

Adelaide stumbled slightly in the October 2016 quarter as dwelling prices fell by 2.4%, according to CoreLogic. Nonetheless, this hasn’t put much of a damper on the capital’s overall performance, as property values rose by 2.5% throughout 2016. In particular, houses are popular, with the median price being bumped up by 2.7%.

By contrast, the median unit price decreased by 0.3%. Moreover, discount levels increased over the past 12 months. Rental yields also dropped slightly, which may discourage investors. Thus, homes are taking a little longer to sell compared to the previous year.

Perhaps in a bid to stimulate demand further, the number of new listings has fallen by 1%. This reduced stock may account for the expectation that auction activity in Adelaide will remain stable, with clearance rates in the mid-70s, even though the other small capital cities are looking at a drop-off.

 

Affordability to spur activity

A reason for the price decline in units could be the culmination of construction efforts on the large number of buildings approved since 2012 across Australia. According to a report published by the Housing Industry Assocation, these initiatives have facilitated economic growth and addressed a lack of supply experienced in the previous decade.

However, the influx of new stock may have left buyers spoilt for choice, limiting new activity as SA, along with WA, begins its down cycle long before the other states.

Nonetheless, low dwelling prices could attract buyers seeking homes outside of more expensive cities like Sydney and Melbourne.

“Growth and activity is likely to continue moving into more affordable markets, which may start to include areas outside of the east coast over 2017, including Adelaide, Darwin, and areas of Perth,” states Eliza Owen, market analyst for OnTheHouse.com.au.

Given SA’s gradual but fairly consistent growth pattern, this could signify long-term potential for gains. So it may be a good time for interested parties to buy and then hold on through the anticipated decline in the housing market.

 

Public investment expected to boost demand

Charles Tarbey, chairman of Century 21 Australasia, says the Adelaide marketplace is “deeply connected to the South Australian state economy which has struggled, but is rebounding and conditions continue to remain steady”.

State final demand is predicted to increase at a rate of over 2% in 2017, up from the average figure of 1.2% over the past six years. This could provide some momentum for the property market.

While the shutdown of vehicle manufacturers and the property slowdown are thorns in SA’s side, economic factors such as the state of the Australian dollar and significant public investment in defence projects are predicted to sustain the market.

“Growth will be driven by continued solid growth in household and government spending, offsetting falling business investment and a decline in dwellings investment from 2017/2018 (after a temporary rise [in 2016]),” says Richard Robinson, senior economist at BIS Shrapnel.

“New public investment rebounded by 9% in 2015/2016 and is forecast to rise a further 25% over the next two years, led by robust rises in road construction, telecommunications (NBN roll-out) spending, major rail works, a number of projects at the state’s universities, defence facilities and the $140 million Flinders Medical Centre expansion.”

These projects will lead to new employment opportunities and potentially spur migration, encouraging population growth. In turn, this will sustain demand.

 

SUBURB TO WATCH

Modbury: Adelaide suburb mirrors state growth

Situated at the end of the Adelaide O-Bahn, Modbury is a flourishing suburb whose growth over the past year reflects South Australia’s slow but steady growth pattern.

House prices lifted slightly by 2.9%, but units experienced a greater increase of 4.1%. This could signify that the low prices and high rental yields of apartments are stimulating demand.

Residents may also be drawn by the wealth of amenities in the area, which include the Tea Tree Plaza shopping centre and Modbury Hospital. Civic Park, which faces Tea Tree Plaza, is a popular picnic spot.

This suburb is also ideal for students as it is home to a primary school, a high school and the Tea Tree Gully campus of TAFE. Moreover, Adelaide is about 30 minutes away by car or bus.