Interstate investors now competing with local buyers in Adelaide
Adelaide's property market shows no signs of slowing down, with underquoting running rife, prices holding strong and interstate investors competing with locals for relatively affordable homes.
With Adelaide’s median house price continuing to exceed its own record highs, the city of churches shows no signs of slowing down.
Currently, Adelaide’s median house price is $682,642, a steady rise from March 2023’s $645,812.
Over the past year, Adelaide has become renowned for its consistently solid performance against the fall and rise of other markets.
Its regional centres also continue to top the charts and make growth headlines.
But on the ground, it is not only investors driving prices and chewing supply, but locals alike.
With the pause on rate rises, there has been a breath of fresh air for homeowners and those looking to get into the market, nationwide.
Across the country, borrowing capacity is still a limitation for many buyers as higher rates assessments dampen people’s ability to service larger debts.
However, in Adelaide, investors will have to compete in a strong market, and the asking prices offer little to no guidance for buyers to set their expectations on. Many properties are selling 10 to 20 per cent above the price guide, which can quickly reflect a $100,000 price differential.
Buyers from interstate, who have little knowledge of the local property values are getting tripped up on pricing and often missing out on properties over and over again.
Many other states have had problems with underquoting over the years and introduced stringent legislation to deal with the problem.
This begs the question, does the responsibility lie with the selling agents for underquoting or is the market moving too quickly to keep up with it?
Underquoting rife in hot Adelaide market
Some agents will price a property low to try and generate strong buyer interest and activity, but in most cases, the market is simply moving too quickly for the agents to keep up.
Properties are getting a dozen or more offers on the Monday after the first open and the offers are far exceeding price expectations. This makes it hard for agents to accurately price properties when going to the market.
We have even experienced one property getting 72 offers after the first week of marketing.
Buyers need to look at what properties have sold for in the area to fine tune their knowledge of values to be able to compete in the Adelaide market as opposed to simply relying on the asking prices or agents guides.
Rest assured though, there are still some great buys under $600,000 for the savvy investor.
Many of the southern state growth suburbs still attract sales around $500,000 – appealing to both investors and locals.
A peak in interest rates would spark further buyer interest but the ABS inflation data released Wednesday (27 September) showing an increase in the consumer price index from 4.9 per cent in July to 5.2 per cent in the 12 months to the end of August may tempt the new Reserve Bank governor to start her tenure with a rate rise.
North Adelaide property booming
In the north of Adelaide, the demand has been unprecedented as the market offers a sweet spot for all types of buyers without being too far from the CBD or attractive coastal amenities.
This demand extends beyond the purchaser and follows through to the tenant profile who also have begun to favour the northern end of town. Yields are pushing up to 5 per cent and properties leasing out within a week or two of being offered to the market.
Brahma Lodge is in the local council City of Salisbury and has some of the highest rental demand and yields in the area – with infrastructure including more than $4 billion worth of defence projects, the $3 billion Riverlea Estate, $1.9 billion Edinburgh Parks Precinct and the electrification of the Gawler train line.
Just on Wednesday (27 September), Premier Peter Malinauskas opened the new high-tech custom built 12,000 square metre CHEP Service Centre at Direk. It represents the latest significant investment in the fast-growing Direk business and industrial precinct.
With such a lucrative infrastructure pipeline, the area also attracts major companies generating numerous jobs for the area.
These combinations are attractive for entry-level investors and first home buyers alike – especially those looking to stay below the $600,000 price point.
To the south of Adelaide, the supply and demand story doesn’t differ much, however, our teams on the ground are still identifying opportunities below $650,000.
As demand continues to heighten supply continues to squeeze, which will push prices further.
While significantly lower than a Sydney, Canberra, Melbourne median house price, the south of the city still squeezes the budget for those looking for an entry-level investment.