Adelaide property downturn is hitting the top end hardest

The top end of Adelaide’s property market is being hardest hit in the downturn, with some tipping price falls of up to 15 per cent.

And, like much of the rest of the nation, investors have all but disappeared from that city’s market.

Yet experts say there are still buyers for more affordable properties, namely those under or just over $1 million, in a market still underpinned by immigration.

Senior Adelaide buyers advocate for Propertybuyer, Jonathon Moore, said the market had undeniably cooled.

“It’s certainly come off, what percentage we won’t know for a while,” he told Australian Property Investor Magazine.

“That $2 million mark seems to be pretty hard at the moment.”

Mr Moore said prices could fall by between 5 per cent and 15 per cent, with the top end of the market likely to be hardest hit.

“That’s going to be the eastern suburbs, to north-eastern suburbs of Adelaide, your upper-end, the $2m-$3m stuff,” he said.

Adelaide’s leafy eastern suburbs, between the CBD and the foothills of the Adelaide Hills, are home to many of the city’s most established and expensive properties.

Mr Moore said investors had left the market, following the changes to negative gearing and capital gains tax laws.

“There’s no investors, inquiry from investors has dried up all around the country.”

But it wasn’t all doom and gloom.

Auction clearance rates had plummeted but many homes were later selling, particularly at the more affordable end of the market.

“The auction numbers are way down because of confidence but they are selling a week or two, or three, afterwards,” Mr Moore said.

“There’s money about.”

Median home price doubled in decade

Immigration was helping keep a floor under the market.

“If you go far north and far south, because of the lower price range, and mass immigration, there are multiple buyers on properties,” Mr Moore said.

“Certainly in the north, Salisbury, Parra Hills, Pooraka, out to Brahma Lodge”.

API Magazine reported in mid-July that Adelaide home prices had begun falling, although the falls were yet to be reflected in the data.

The latest figures from analyst Cotality show the median Adelaide dwelling value fell 2.7 per cent in the three months to 30 September, down 1.3 per cent in September.

Cotality said prices nationwide fell 1.1 per cent in September, taking the cumulative decline since the March peak to 5.2 per cent nationally.

Cotality research director Tim Lawless said that nationwide, “97 per cent of capital city suburbs” recorded price falls in the September quarter, “highlighting the broad-based scope of this negative housing cycle”.

The median Adelaide house price was now $990,531 and the median unit price was $674,188, according to Cotality.

Over the past decade, the median Adelaide dwelling price more than doubled, surging 104.3 per cent. Of the capitals, it was second only to Brisbane, which saw price growth of 105.3 per cent.

By contrast, Sydney and Melbourne recorded dwelling price growth of 39.5 per cent and 24.3 per cent respectively over the decade.

The southern capitals have seen the biggest price falls to date, with Sydney dwelling values down 7 per cent over the past year, and Melbourne down 6.2 per cent.

Rates and policy handbrakes

Matt O’Donoghue, buyers agent with Adelaide’s Waterman Property Advocates, said market sentiment “fell off a cliff” after the Federal Government announced the negative gearing and capital gains tax reforms in May.

Tuesday’s move by the Reserve Bank to lift rates, up 0.25 points to 4.6 per cent, a 15-year high, would bite further.

“Many mum and dad investors, and first-time investors, have stopped because they are very curious and cautious,” Mr O’Donoghue told API Magazine.

“And now we’ve just had the rates increased, I’m going to start to look for another job, driving a school bus or something,” he joked.

“I worked through the GFC, had an Elders franchise when it happened back then…it feels similar to that,” Mr O’Donoghue said.

“The agents always talk it up (but) it’s not going to be short-term.”

On the upside, it was going to turn into a “buyers’ market for the first time in five years”.

“I’ve just made two offers below the asking price, I haven’t been able to do that for five years,” Mr O’Donoghue said.

On one property, in Adelaide inner-city, he had just negotiated a purchase for a buyer for a value “within the price guide” quoted by the vendor.

“Over the last four years, post-Covid, it had to be at least 10 per cent over,” he said.

Mr O’Donoghue said that while the Federal tax changes had a major impact, the Adelaide market needed to cool.

“It couldn’t sustain itself in Adelaide…it did need to slow down,” he said. 

“It was going crazy, and for first home buyers it was just horrendous.”

“I’m in my 60s, I bought in Adelaide, in Thebarton, back in 2000 for $130,000 — I shit myself,” Mr O’Donoghue said.

“If I’d bought it today it would be $800,000. It’s crazy.”

Commercial doomsday predictions averted

As residential property retreats, predictions that the pandemic would hollow out Australia’s CBDs appear to have been wide of the mark, with new research from the University of Adelaide finding strong and growing demand for city-centre commercial property.

The research team surveyed 789 Australian business owners and senior managers between 2022 and 2023, examining location preferences, working-from-home arrangements and the factors influencing relocation decisions.

Professor Akshay Vij said firms continued to place a high premium on CBD locations, with businesses willing to pay around $875 per square metre a year more than current rents for a CBD location.

Around 34 per cent of firms placed a value of at least $1000 per square metre a year on being located in a CBD.

The findings are supported by JLL data showing occupier centralisation has increased across almost every Australian capital over the past five years.

Adelaide recorded one of the strongest shifts, with 16.6 per cent of office occupier activity involving moves towards the CBD between 2021 and 2025, second only to Perth at 18 per cent.

JLL Research Director, Rick Warner, said the figures showed that the much-discussed pandemic “donut effect” had not hollowed out Australia’s CBDs.

For Adelaide’s commercial property market, the research adds weight to the argument that working from home has changed the way CBD office space is used rather than eliminated demand for it.

The University of Adelaide researchers suggest businesses may require less space per employee as hybrid work becomes embedded, but that could allow more firms to occupy centrally located space.

At the same time, workers may live further from the CBD while commuting less frequently, supporting demand for services and amenities in suburban and regional areas.