Adelaide is getting lots of positive feedback, but buyers should be careful about their investing strategy
There's been a lot buzz lately about Adelaide as its affordability attracts buyers and propels demand.
“A low rental vacancy rate, sitting at 1.1%, coupled with strong yields, is making Adelaide a go-to for investors. We have seen a surge in investor clients and activity post-election,” says Katherine Skinner, director of National Property Buyers SA.
“The local population grew by 0.8% – 14,585 people – in 2018, showing the growing popularity of Adelaide and that less of our locals are heading interstate.”
A good reason why population growth is back on track is that SA is picking up economically; industries like defence and education are flourishing, and more community and civil engineering projects are being approved. According to CoreLogic’s latest Cordell House Index Price report, the Carrapateena Block Cave mine is set to be expanded soon, which could boost residential construction costs.
The inner- and middle-ring suburbs of Adelaide in particular are among the biggest drivers of growth in median house prices as buyers battle it out to buy family homes within the inner ring of Adelaide. The suburb of Broadview in particular has been pinpointed as a growth market that’s expected to perform steadily in the coming months.
“Lending capacity increases are sure to continue this trend of investor confidence in the Adelaide market, where you can get some serious bang for your buck and strong yields,” Skinner explains.
“If you make a smart buy, you will see strong growth short-term and into the future.”
However, she also warns buyers, especially new investors, to make their investments wisely in this market, or they could end up cutting a raw deal.
“While positive investor sentiment has been seen postelection, rate cuts and lending adjustments, this confidence, along with the lack of quality investment stock, can pose significant risks to inexperienced investors who are keen to jump the gun just to get a purchase made,” Skinner says.
“This is a dangerous game that can cost you money both short- and long-term. The media continues to talk loudly about the Adelaide market and the opportunities it presents; however, with current stock levels sitting at basement levels, you are much more likely to overpay for the wrong property.”
BROADVIEW: A tale of two markets
First laid out in 1915, the suburb of Broadview is part of both the Port Adelaide Enfi eld City and the Prospect City LGAs. It is situated 6km north of the Adelaide CBD.
House values have been on the rise over the fi ve years since July 2014, pushing the median value up to $539,802. By contrast, unit values have been down during the same period, causing the median price to fall below $300,000.
However, rental demand is strong in the unit market, with rental rates increasing by 5.1% to a weekly advertised average of $310. These are accompanied by high yields averaging 5% as of May 2019. Yields are much lower for houses, at an average of 3.6%.
Location: Broadview is just 6km from the Adelaide CBD
Growth: House prices are rising while unit values are falling