Chart-topping Adelaide property no longer the unheralded sibling
Adelaide is one of the last capital cities to be delivering price growth but is still flying under the radar of most investors.
Stand Australia’s capital cities up against the kitchen door frame to mark their growing heights with a pencil, and it’ll be Adelaide - long regarded as the runt of the family - who’s been quietly adding more than a few inches to its investment stature.
It’s true Adelaide is often seen as a bit of a country town, according to Tim Vine, the head of sales of South Australian agency, Harris Real Estate, but the city is evolving.
“There’s not the type of ups and downs of larger metropolitan centres like Sydney and Melbourne, but iconic new developments are positioning the South Australian capital to be a steady, reliable market for the future.
“I’m cautiously optimistic but I think a lot of eyeballs will be on Adelaide for the next 60 days because, when you start to see articles come out around about just two other cities recording price growth (Darwin and Perth), I think that’s going to get people wondering, ‘well, what am I missing out on here in Adelaide?’ What’s in the water there?
“I think in the next 60 days, the growth won’t necessarily excite people but the lack of decline will.”
Mr Vine said the next six months shaped as being steady but coming into January he said prices could rise again.
“From what we’re seeing in the midst of some pretty aggressive interest rate rises we’re still getting some fantastic results and strong clearance rates in the auction market, so there’s clearly an appetite to buy property in Adelaide.
“Unless something really drastically changes, I can’t see us going backwards,” Mr Vine said.
CoreLogic’s July 2022 Home Value Index backs up these claims. Adelaide’s dwelling value over the past month increased by 0.4 per cent, compared to Darwin at 0.5 per cent and Perth 0.2 per cent, while Brisbane (-0.8 per cent), Melbourne (-1.5 per cent), and Sydney (-2.2 per cent) declined in value.
Adelaide the outlier
API Magazine’s newly released Property Sentiment Report Q2 2022 found that even though Brisbane prices were now retreating and Adelaide was the fastest growing capital in the country, the latter was still not on a lot of property buyer radars.
Among the survey respondents, Brisbane attracted interest from almost half of respondents (43 per cent) as a preferred place to buy, while Adelaide was on the radar of a paltry 7 per cent.
Its relative lack of appeal or attractiveness appears unwarranted.
In the regions over the last quarter, South Australia leads the country with 5.3 per cent growth, followed by regional Northern Territory and Tasmania with 3.1 per cent and 3.2 per cent respectively.
Ray White chief economist Nerida Conisbee said that since the end of last year, the market has slowed considerably.
“Ray White scenario projections suggest that in a cooling market, Adelaide’s median house price would go from $668,000 today to, in a slow down, $685,063, or in a boom market to $772,455 by December 2023,” she said.
Looking at units (or apartments), CoreLogic economist Kaytlin Ezzy said Adelaide’s unit market is the only house or unit market yet to show signs of a slowdown in growth.
“Adelaide is the outlier in terms of unit performance at present, partially due to an extraordinary shortage in stock,” Ms Ezzy said.
“With approximately 1,100 units advertised for sale at the end of June, Adelaide’s total listing levels are 35.0 per cent below the level seen this time last year and 45.9 per cent below the previous five-year average.”
Recent CoreLogic analysis also found 5.6 per cent of suburbs in Brisbane and 5 per cent in Adelaide saw unit values gently fall over the quarter, compared to 68.2 per cent and 59.4 per cent of Sydney and Melbourne house and unit markets.
“From our perspective, the rental market has held strong,” Mr Vine said.
“We manage just under 3,000 properties in the rental space, and vacancy rates have lingered around 30 vacant properties.
“There’s a desire for tenants to remain long term.
“Our average rent now sits around $450 per week, but if we went back to January we were $400, so we’ve seen an increase of $50 per week in six months, so it is incredibly affordable.
“The average rent for a unit is sitting just above $360 per week and you can still pick up a good two-bedroom unit just under $400,000 as well, so the yields are still quite good.”
BuyersBuyers CEO Doron Peleg agreed that after a relatively quiet decade a looming rental crisis and relative affordability is driving a tremendous surge in interest from investors looking to buy in Adelaide.
“Two of the key features of the past couple of years have been a ‘race for space,’ and water views as a draw card for property buyers.
Some of Adelaide’s beachside suburbs tick both of these boxes, and from relatively attractive price entry points as compared to the larger capital cities,” he said.
The CBD is also growing in appeal.
“The median sale price still sits in the $700,000 range, for what you’re getting so close to the CBD, and that really doesn’t seem to be as much of a drawcard compared to Sydney or Melbourne because we don’t have the population who necessarily work in the CBD but the fact that you can still get a pretty significant landholding with a beautiful character property for around $1 million is attractive,” Mr Vine said.
New CBD developments such as Eos by SkyCity and Lot 14 are creating a new dynamic in Adelaide.
During COVID, Hansen Yuncken completed the build of the iconic Eos by SkyCity, a $330-million luxury hotel.
“It’s no surprise that Adelaide now has the highest hotel occupancy rate with these kinds of amenities located throughout the city,” Hansen Yuncken's construction manager Scott Brumfield said.
“Investment in new entertainment and arts projects is showing no signs of slowing down and the flow-on effect often results in businesses and individuals flocking to the city to be part of the lifestyle.”
The Lot 14 precinct also holds promise for attracting new business and people to Adelaide’s CBD.
“In the future, Amazon and Google will have their offices based out of Lot 14.
“There’s a lot of investment in that space, which used to be the old hospital in the CBD, so we’re starting to see a lot more exciting career opportunities for people,” Mr Vine said.
“For us, to be in one of the two capital cities to actually post capital growth in the last month is something we’re very proud of.
“It’s not very often we’re in the spotlight for our properties but for us to have that growth is really nice.”