The Adelaide market is trying to improve, as investors wonder when the elephant in the room will awake
Uncertainty is once again plaguing South Australia, as investors wait for news on the state’s flagship project, the Olympic Dam mine expansion. For a market without much of a history of volatility or fluctuation, it’s business as usual in the meantime for Adelaide properties.
“Adelaide has been chugging along so far this year. There was some hint that it might pick up, but we’ve got the city flat-lining so far,” says Andrew Wilson, senior economist at Australian Property Monitors (APM).
Adelaide’s median unchanged since the start of the year, but down 2.1% on the same time last year, indicating that sentiment is in need of improvement, according to APM. There has been some joy for the unit market, with a median of $296,802 being up 1% on the March quarter figures, but this is merely the early signs of recovery from a price slip in the second half of 2011. On a year-on-year level, the unit median is still down 3.3%.
“I think it will be a modest outcome this year for South Australia,” says Wilson. “It’s a quiet market that’s not characterised by major price moves, due to smaller numbers of transactions. It’s hard to put your finger on where that’s going to end up. There are some reasonable signs there, but I think the jury’s still out and Adelaide is treading water.”
From business to economy
Flailing market sentiment in Adelaide has been attributed to the waiting game that SA is playing as it sits on the fence of the two-speed economy.
Deloitte Access Economics says that SA’s economic future could hope for a resources boost along the same lines as states like Western Australia, Queensland and Northern Territory, but for now, its industrial structure and negative exposure to a high-performing Australian dollar is holding it back.
“The state is blessed with a world-class resource in Olympic Dam and the economics will stack up at some stage for the mining sector to invest something like $20bn (perhaps even $30bn) to bring that potential to fruition,” says the report. “Yet the timing of the Olympic Dam go-ahead has been put into question by recent developments. The Australian dollar makes building and operating a mine in Australia a little less competitive versus alternatives elsewhere.”
Businesses and government are making some amends to the investment hole left by Olympic Dam, with a number of construction projects underway. The $1.8bn desalination plant at Port Stanvac is the headline act, while the $842m South Road Superway upgrade and $546m Northern Expressway project are lifting infrastructure employment opportunities. Investment into the electrification of the Gawler and Noarlunga rail lines totals $804m, while the Onkaparinga River is getting a $316m bridge.
On the commercial side, work on the Royal Adelaide Hospital will provide base activity through to 2016 and has fetched $2.1bn in funding, while the $535m second stage of Adelaide Oval’s refurbishment will last through to 2014, along with Westfield’s $280m redevelopment of the Marion Shopping Centre.
Some wind in the sales
The SA government has reported a rise in property sales across the June quarter, with 3,800 settlements in the Adelaide metropolitan area. Real Estate Institute of South Australia (REISA) President Greg Moulton has welcomed the increase in activity.
“Activity is the really important driver in the property market, so this is a positive change, especially after two recent interest rate cuts.”
Moulton believes the trend signifies the beginning of the end for an extremely tough period in South Australian real estate.
“It will be a slow recovery as the general economy is weak, but people are starting to think property again, for both investment and a different lifestyle,” he says. “The amount of stock on the market is still very high, which equals a longer time on the market, but the flip side for buyers is there are more choices and softer purchase prices.”
