Affordable Adelaide scores well with investors

If the Adelaide property market mirrored the status of its two beloved football teams, the Adelaide Crows at the bottom of the ladder would be listings, and the Port Adelaide Power sitting atop the ladder would be buyer demand.

By Craig Francis

| 23-6-2020 | Residential | 3 min read

Adelaide's relative affordability and stable house prices have piqued the interest of east coast investors. Photo: Shutterstock (Image source: Shutterstock.com)

In other words, listings in Adelaide are languishing at a low ebb, while buyers are queuing up to kick a goal.

Adelaide’s median house price of $441,200 is significantly less than other capitals, with only Darwin properties going cheaper.

By comparison, Sydney’s median is more than double at $885,100, Melbourne is at $686,800, Canberra $637,200, Brisbane $508,300, Hobart $486,000 and Perth $443,600.

More than 8.3 per cent of the limited listings in the city of churches are being discounted from their asking price, compared to just 3.5 per cent at the same time last year.

It is this in this environment of tight supply and realistic pricing that demand is stirring up, to the point queues are forming at home opens.

National Property Buyers director Katherine Skinner told Australian Property Investor Magazine that while investors needed to act with a degree of caution, competition for well-placed properties was strong.

“As COVID-19 restrictions have eased in Adelaide buyers have flocked to open houses, resulting in excessive queues out the front of homes that would have never seen such interest, purely because stock levels are extremely low,” Ms Skinner said.

“We are seeing strong competition within first home buyer preferred areas, which also tick the boxes for high performing investments."

Much of the demand has been driven by interstate buyers, particularly from Melbourne and Sydney.

While buyers in those markets have experienced boom and bust cycles, Adelaide has been a more stable market.

In the 12 months before the pandemic, Adelaide had a modest median price lift of 1.8 per cent, compared to Sydney’s rise of 14.3 per cent and Melbourne’s 11.7 per cent.

Ms Skinner said around half of their clients were investors from interstate or overseas, priced out of local markets or seeking lifestyle and investment opportunities.

Real Estate Institute of South Australia president Brett Roenfeldt said Tasmania had previously been a competitor in the lifestyle stakes when it came to attracting interstate interest, but surging prices on the Apple Isle now made Adelaide a more competitive alternative.

“There are exceptionally good opportunities where buyers can get real value for money, taking advantage obviously of very low vacancy rates for solid rent returns but also looking at the incredible lifestyle benefits of living in this great state,” Mr Roenfeldt said.

“Listings are still very tight but we are seeing slow improvement in the number of properties coming onto the market and the number of auctions being booked — since the major easing of restrictions, buyer numbers and open inspections have greatly increased.”

Rigid rents

Rents have also been unwavering throughout the health crisis gripping the country, with its vacancy rate of 1.2 per cent the lowest in the nation.

“The rental market has continued strongly throughout the COVID-19 crisis, with no drop in rental prices and strong interest in quality properties,” Ms Skinner said.

“Most of the properties our clients have purchased are leasing within the first week of settlement, which just shows how strong this market continues to be and how purchasing the right investment can mitigate your risk right now.”

Mr Roenfeldt said the low vacancy rate was an enormous benefit for investors and Adelaide would remain the lowest vacancy rate for the foreseeable future, with rents expected to rise.

ADELAIDE RENTS	House	Units
Median weekly rent	$450	$435
Median yield %	3.93%	5.66%
Median rent change - 1 year	3.44%	6.09%

Hotspots

For buyers looking for affordable entry into the housing market or a lifestyle change, the Adelaide Hills have proven an attractive option.

The lure of green spaces and bigger blocks is proving more appealling than the city for many in the wake of COVID-19.

The Hills boasts many stunning properties of the type that adorn real estate lift-out covers, but affordable options are plentiful, including Lobethal with a median house price of $375,000, Nairne ($384,000), Meadows ($400,000) and Mount Barker ($420,000). All four areas had median house values below the city’s median of $480,000.

The limited listings were leading to a greater proportion of transactions taking place off-market.

“Since the easing of major restrictions, many sales were happening either off-market or within a week or so of being released on the market,” Mr Roenfeldt said.

Ms Skinner agreed.

“There are many more off-market opportunities right now that if you’re only doing online searches you will never find,” she said.

“Pockets within the north-eastern suburbs along with the inner-west are hotspots for investors at present, while apartments, new builds for investment and student accommodation have taken a significant hit and need to be looked at with greater care right now,” she said.

REISA President Brett Roenfeldt’s potential hotspots in inner Adelaide: