Should you invest in Adelaide?

By Mark Rosanes | 17 Aug 2020

The property market in Australia’s state capital cities have diverged since the coronavirus crisis reared its ugly head and disrupted the economy. While some cities continue to reel amid the market volatility, some have picked up relatively quickly thanks to a combination of economic and demographic factors, as well as state and local policies. 

And the South Australian capital city of Adelaide is among those showing signs of growth, according to experts.  

“Adelaide exhibits good potential for investors who want to buy and hold,” says John Lindeman, one of Australia’s leading property market experts. “It’s a property market that combines liveability and affordability with long term growth consistency and price stability.” 

“The median house price of $475,000 is currently around half that of Sydney and, therefore, much more affordable for investors and home buyers, so there is little need for those high rise inner urban unit developments of Sydney, Melbourne, Brisbane, and Perth,” he says.

Lindeman adds that these factors “enable the city to avoid the booms and busts that other large city housing markets experience,” resulting in “a much more consistent rate of price growth than bigger cities.”

Simon Pressley, head of research at award-winning buyer agency and property market analyst firm Propertyology, says that while Adelaide is not on the firm’s list of “top half-a-dozen” Australian locations to invest in right now, they consider the city to be a solid property market.

“Out of the eight capital cities Propertyology has ranked, Adelaide is tied with Brisbane for second behind Canberra for property market potential over the next 12 months,” he says.

Pressley adds that despite Adelaide’s underwhelming economy over the last decade – which he says was a “drag on its property market performance” – the city’s “affordable housing, controlled volumes of new housing supply, tight rental supply, and an appealing lifestyle are solid fundamentals” for growth.

Insulated property market

Lindeman says that Adelaide’s lower reliance on overseas arrivals – including tourists, students, and migrants – compared to the eastern capital cities has largely insulated its property market from the pandemic’s impact.

And Pressley agrees, citing the most recent JobKeeper data from the Australian Bureau of Statistics (ABS). 

“[The latest figures reveal that] of the eight capital cities, Adelaide has the lowest portion of businesses registered for the COVID-19 income support package,” he says. “The city obviously isn’t as densely populated as Sydney and Melbourne plus Adelaide’s economy isn’t as reliant on international students and tourism. The COVID-19 impact won’t be as savage [in the city] as in some other locations.”

However, both property market experts admit that the South Australian capital is not immune to the outbreak’s economic impact.

“The collapse of migrant arrivals is leading to less rental demand in the outer suburbs such as Salisbury, while suburbs with many international students such as Regency Park will experience declines in rental demand as the students complete their ESL, TAFE, and university courses, and return home,” Lindeman says.

Pressley adds, “on the whole, Greater-Adelaide has a low vacancy rate of 1% and is an otherwise firm market but job losses in the hospitality sector, disruption to inner-city office jobs generally, and COVID-19’s impact on the university sector have damaged the inner-city rental market. Residential vacancy rates in Adelaide’s CBD spiked sharply to 6% at the end of June.” 

The migrant boon

The lifting of global restrictions in the future may potentially have a positive impact on Adelaide’s property market, according to Lindeman.
“Once our international borders are opened again, we may see a fundamental paradigm shift occurring in the cities where overseas migrants and international students choose to live,” he says. “Adelaide is perfectly poised to take up the slack created by other cities, with Sydney being too dear and Melbourne cursed by the stigma of repeated COVID-19 outbreaks.”
He adds that the potential rise in migrants “could signal a rosy future for the Adelaide property market.”

“Increased numbers of migrants will lead to more rental demand in Adelaide’s most affordable locations such as Davoren Park, Elizabeth Downs, Smithfield Plains, Elizabeth North, and Elizabeth South where houses can still be purchased for under $200,000, making them the cheapest suburbs to buy a house in any of our capital cities, and where high rents offer positive cash flow from day one,” Lindeman says.
“Adelaide also has a small boutique unit market, quite different from those of Sydney and Melbourne, and high demand for units in Glenelg, North Adelaide, and the Adelaide CBD. Home buyers and investors are likely to see prices rise in those suburbs,” he adds.

However, Pressley says he and his company still sees “nothing jumping out to lure us into investing in Adelaide” but adds they consider the city as a “relatively low-risk property market.”

For those keen on investing in the city, his advice is to “completely avoid apartments and instead focus on detached houses in middle-ring suburbs that are in close proximity to major employment nodes.”

Top Suburbs : melton , geelong west , newcastle , wallsend , marrickville

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