If a market starts booming, but no one notices, does it make a sound?

That’s something Adelaide investors will have to consider as the city, while far from “booming”, shows a considerable strength that has been downplayed so much over the years that it is almost forgotten. Amid frequent talk of a flat, uninspiring South Australian property market, it has been easy to lose sight of the fact that Adelaide has the most affordable mainland property prices. And by a long shot.

With a current median house price of $394,000, city property prices are galaxies away from the likes of Sydney and Perth where $390,000-odd will scarcely give you more than a toehold into the market – a shoebox apartment in the inner city or a house in a far flung or lower-income locale.

But it’s not just the actual number figures that make Adelaide prices affordable (affordability does depend on a number of factors) it’s that residents are well within their means to pay them.

A study by Demographia shows that Adelaide prices enjoy one of the largest margins of affordability among capital cities in terms of the gap between average income and house prices.

Using a methodology known as “median multiple”, Demographia divided median house prices by average household income (before tax), to determine which cities had the best and worst relative affordability.

The result is an Adelaide affordability score that is markedly better than the likes of Sydney and Melbourne, Australia’s two least affordable markets.

Demographia also revealed that Adelaide property is more affordable than many regional areas – regions and cities that include Coffs Harbour and the Sunshine Coast. 

Interest rates step in

Within an environment where interest rates are at an historic low, Adelaide’s affordability benefits are now likely to be enhanced further. Trends forecaster BIS Shrapnel reveals in its Outlook for Residential Land, 2013 – 2018 report that improved housing affordability fuelled by low interest rates looks likely to result in a “moderate” increase in demand for housing in Adelaide.

The report’s author, BIS Shrapnel senior residential manager Angie Zigomanis, explains that increased buying activity brought about by interest rate cuts could possibly have a stronger impact on price growth if it weren’t for an already excess supply of Adelaide properties on the market.

This, he says, is a hangover from the GFC-era, when developers were building a lot of properties in the city. Such development has since slowed down, paving the way for “subdued, although growing” demand for housing.

“The weaker market [in] Adelaide reflects activity falling from unsustainable record levels,” Zigomanis says.

Zigomanis adds that Sydney and Perth should lead the nation in demand for residential land over the next five years, but that Adelaide (along with Melbourne) should follow in their footsteps, but will see more modest activity.