Adelaide's property boom is over, agents say

The Adelaide property market is following Sydney and Melbourne into the red — it’s just yet to show up in the official numbers.

According to agents, the housing market in the City of Churches has peaked, with prices down 4 to 5 per cent in some areas.

According to analyst Cotality, Adelaide dwelling values remained dead flat in the month of June — steady at 0.0 per cent — having risen by a total of 1.3 per cent over the preceding three months.

But on the ground, the downturn is already well underway.

“The numbers haven’t caught up yet,” says Manpreet Dhillon, Director of SMD Property Buyers Agency.

On the city’s north-side, including the cities of Playford and Salisbury, prices were down by between 4 per cent and 5 per cent, Mr Dhillon said.

It was a similar story in Adelaide’s north-east, including in Tea Tree Gully, where prices had fallen “at least 3 to 4 per cent”.

“There’s no doubt the market has definitely slowed down,” Mr Dhillon said.

“What’s happening on the ground is investors have definitely slowed down; 50 per cent to 60 per cent of investors are out of the market right now.”

He said the market had cooled at all levels, with the top end of the market coming under particular pressure.

“Anything above $1 million has really slowed down,” Mr Dhillon told Australian Property Investor Magazine.

“Suburbs on the northern side, which are typically investment suburbs because of higher (rental) yields, properties at $600,000, $700,000 and $750,000 have come back 4-5 per cent.”

Julie DeBondt-Barker, founding Director of Property Home Base buyers agency, said Adelaide had followed the eastern capitals into the downturn.

“It’s slowed right down,” she told API Magazine.

“It’s really about the same as we see in Victoria and New South Wales right now.

“Everything’s on a bit of a pause.”

Investors had halved and owner-occupiers were following suit, spooked by the negative sentiment, Ms DeBondt-Barker said.

Adelaide joining eastern states capitals

According to Cotality, Adelaide home values, at a median of $945,868, are the fourth most expensive in the nation, behind Sydney, Perth and Brisbane.

Adelaide home prices more than doubled over the past ten years, booming 111.4 per cent according to Cotality. Over the past five years, prices were up 72 per cent.

Nationwide, values fell 0.4 per cent in June, “marking the largest month-on-month fall since December 2022”, according to Cotality Research Director Tim Lawless.

“The June quarter marks a significant shift in Australia’s housing dynamic,” he said.

“Capital city home values have fallen by 1.3 per cent over the quarter, with Sydney leading the pace of decline at 3.2 per cent.

“Melbourne values were down 2.6 per cent through the quarter, and ACT values are 1.3 per cent lower,” Mr Lawless said.

The softness on the ground in Adelaide spells more bad news for the nation’s property market, with price falls likely to be reflected in upcoming data.

“Nationwide, weaker conditions through the June quarter were attributable to an array of downside factors,” Mr Lawless said.

“Even before interest rates rose by 75 basis points, we were seeing affordability hurdles weighing on buyer demand.

“Higher cost of living pressures, deeply pessimistic sentiment and a further dampening of demand via property taxation changes announced in the federal budget are all contributing to weaker housing conditions,” he said.

Interest rates remained a “key source of risk”.

“The RBA held the cash rate steady in June at 4.35 per cent, providing some breathing space after earlier increases,” Mr Lawless said.

“However, the case for another rate hike has not disappeared.

“With underlying inflation still above target and the labour market remaining tight, the data flow over the next few months will be important in determining whether the current pause can be sustained.”

Buying opportunities still exist

Cotality data shows relatively soft rental growth is also weighing on the Adelaide market.

Over the year to 30 June, Adelaide house rents grew by 4.9 per cent, which was the second slowest rate of growth of all capitals except for Canberra.

It was a similar story for units. Adelaide unit rents grew 4.3 per cent, trailing Darwin (9 per cent); Perth (7.6 per cent); Hobart (6.6 per cent); Brisbane (5.8 per cent); Melbourne (4.8 per cent); and Sydney (4.7 per cent).

But it’s far from all bad news.

Ms DeBondt-Barker said, for owner-occupiers and first home buyers at least, Adelaide presented some good opportunities.

“If you’re looking to buy, now is a good time,” she said.

“It’s a good time to be out there, without as much noise and competition in the market.”

Ms DeBondt-Barker said concerns about the market appeared overblown.

“Everybody tries to pick when the bottom of the market is and the only way you know is once it’s (happened) and prices are rising again,” she said.

Mr Dhillon said there remained some “great buying opportunities” for owner-occupiers, but buyers were cautious.

“I think there is great buying opportunity, but there is a lot of confusion; people are asking ‘is the market going to drop down further? Should we wait?’.”

Interest rates were key.

“If inflation comes down a little and unemployment rises and they drop the interest rate, then I think it will bring back a lot of buyers,” Mr Dhillon said.