Adelaide real estate shaping as 2024's national hotspot

Many novice investors follow trends or simply take comfort in what they know, often leading to failed investments or a lack of portfolio diversification.

The Brisbane Olympic Games, for example, appeal to the novice investor who could be characterised as chasing a market. Melbourne and Sydney, meanwhile, are known as markets where you (almost) can’t go wrong.

But where will the smart money go in 2023?

Adelaide is shaping as the market to look out for into 2024, despite the City of Churches being largely overlooked by many buyers agents and property investment firms.

Adelaide appears on investment radar

Rewinding back to around 2017, when Adelaide wasn’t on any interstate buyers’ maps, a few savvy investors and buyers’ agencies saw some data emerging that could not be ignored.

The year was marked by vacancy rates at an all-time low, yields hovering around 5 per cent, days on market declining and major projects were being announced across South Australia.

Adelaide was starting to ferment the perfect mix of fundamentals for a good property investment and appeared on property investors’ collective radar.

The key when looking at a market to invest in is focusing on stable investment fundamentals like infrastructure projects, strong rental markets, employment diversity and population growth.

In 2017, the growth phase that was to follow hadn’t yet begun, but the ‘smart money’ knew the data would lead to growth and the early birds were rewarded for their accurate timing.

Elsewhere in the country, Adelaide was hardly the talk of backyard barbeques property talk circa 2017 to 2019. Any mention of Adelaide led to dismissively being told it would never outperform the larger capitals. But the savvy investors kept reviewing the data and stayed the course.

In 2017-2018, an entry-level house in the more affordable family areas like Woodcroft, Hackham, Morphett Vale or Modbury were in the low $300,000s. Now they’re upwards of the mid-$500,000s.

Despite the uncertainty around interest rates and market movements, Adelaide remains poised to stay strong and stable because of the fundamentals that led to a strategic decision to buy in 2017, including:

• Australia’s largest hospital projects, such as Royal Adelaide Hospital and Adelaide Women’s and Children’s Hospital
• the $2 billion submarine and naval contracts that will create employment
• a growing technology sector thriving due to government incentives and assistance to business.

Has Adelaide’s property ship sailed?

Looking to 2023 and beyond, is the smart money still going to Adelaide or has the ship sailed?

With an extensive infrastructure pipeline, job creation, relative affordability and the return of international travellers and migration, Adelaide likely still has growth to unfold.

There is sustainability around the market and although other locations are retracting and softening in the existing environment, Adelaide is still seeing the buoyancy that has made it an attractive market for clever investors.

Home opens are continually attracting upwards of 20 groups at a time and properties are repeatedly receiving multiple offers.

On the ground, the market is still very much ripe for investors and astute investors are taking advantage of this opportunity while others are nervous and sitting on the sidelines, waiting for something to change.

How could Adelaide’s capital growth prospects change?

The uncertainty around rising interest rates and economic conditions indicates that in general, the only thing that could change is capacity and affordability.

This means access to money will not become any easier and in fact will be further stripped away for investors, especially as the cost-of-living rises.

Property prices have declined marginally in the last quarter, down 1.1 per cent.

Credit limitations could impede many investors, particularly those on a lower income may miss this opportunity altogether due to borrowing restraints.

As rates rise, borrowing capacity decreases, property values go up, rents stay relatively high and the cost gap widens.

This principle leaves the novice investor in the dust and the smart money with the windfall.

Who should look to invest in the City of Churches?

Below are some criteria to safeguard investors and help them determine whether they should invest or wait it out.

It is probably wise not to invest if you:

• have employment insecurity
• do not have a stable income
• do not have any savings behind you
• need to sell the property in the next year or two
• are uncomfortable with the property potentially going downwards before it goes upwards.

If you meet the below criteria, this could be the time to consider investing to take advantage of the lucrative opportunities available in Adelaide:

• you have income security and/or savings
• are comfortable with taking a risk for a potential upswing at the other end
• can hold the property for at least two years
• are comfortable with the market fluctuating and can take a long-term view.