Affordability is all well and good, but Adelaide needs more projects to glue together its fragmented market

Adelaide may be an affordable market, but it needs to do more with its economy to sustain demand.

“I think Adelaide is great affordable buying for someone who wants to be close to a capital city,” says Caifu Property’s head of acquisitions, Damien Lee.

“There are a lot of really good things going on in the city. They just need more of an approval base from the projects that the SA government and Adelaide City Council are trying to get off the ground.”

Despite the focus on SA’s defence and car industries fuelling the economy, Lee points out that the education and medical sectors, among others, also support it.

“The tourism sector’s very strong. A lot of manufacturing comes out of Adelaide, as well as aviation. It’s got logistics. I think they’re building a very good foundation – their pre-planning is very good.”

The outlook for this city over the next five to 10 years could be bright indeed, especially once more projects get going. “When deals come in for Adelaide, it will rocket pretty quickly,” Lee says.

An uneven market

Metropole Property Strategists’ national director of property strategy, Kate Forbes, also notes that Adelaide was the only Australian capital city to not see a reduction in settled sales over the 2017–18 period. However, its capital growth potential seems to be diminishing.

“Prices are generally trending upwards but are very subtly reflecting a sharp slowdown in the pace of capital gains,” she says.

“In a marked shift, the greatest growth has shifted from the highest-valued properties towards the lower and middle of the market.”

Forbes also comments on the continued fragmentation of the property market, highlighting Glenelg South and Gilberton as strong-performing suburbs.

“There’s no such thing as ‘the’ market – some submarkets are doing better and some worse,” she explains.

This sentiment is echoed by Metropole Property Strategists CEO Michael Yardney, who believes the high unemployment rate and slow job growth will continue to hold the state back as a whole.

“The Adelaide property market is very fragmented, with some suburbs showing three times the capital growth of others. I know some investors are looking for opportunities in Adelaide, hoping prices will increase, but there are few growth drivers.”

SUBURB TO WATCH

MARION: Housing demand is strong

A well-located pocket 10km from the Adelaide CBD, Marion is a steadily growing market for houses.

House values exceeded $500,000 following a 6% boost over the 12 months to August 2018, maintaining an ongoing positive growth trend of 28.6% in the five years since 2013. Tenant demand is considerable as well, with the median weekly rent coming in at $395 after a 3.9% increase.

However, demand for units is limited – prices began to fall in 2015 and have continued doing so in the 2017–18 period. Rents also rose sharply, by nearly 10% in the same period.

There are many parks and reserves in the area. On Sturt Road there is a sporting complex that includes a basketball stadium.

Nature: Marion boasts much natural beauty in the form of several parks and reserves

Amenities: Marion has a sporting complex with ovals and a basketball stadium