South Australians have endured the last few years taking body blows for its nonperforming economy and property market. This may soon change as a slew of positive factors make their way into the economy
Despite having one of the most affordable housing markets in Australia, investors haven’t paid much attention to South Australia’s offering amid the onslaught of negative news coming out of the state.
When just about every headline screams of impending disasters amid car manufacturing closures, it’s hardly a surprise that South Australians have been pretty gloomy for a while.
The poor performance of the property market certainly hasn’t helped sentiment either. The January results by CoreLogic RP Data shows Adelaide dwelling values falling by 1.2% for the three months ending January and growing by a measly 3.1% year-on-year. Adelaide joins Darwin and Perth as the country’s weakest capital cities during the same period.
Positives starting to emerge
Despite the negative headline-grabbing news, there are powerful forces making their way into the economy according to a Deloitte Access Economics report.
It points out that the recent shifts in both interest rates and exchange rates are almost equally powerful positives that could rescue South Australia’s economy from the doldrums.
“Interest rates and exchange rates are pretty powerful levers for the South Australian economy,” says the report. “Not only are the twin engines of interest rates and exchange rates now fired up in a way that they haven’t for well over a decade, but over the longer term, South Australia is relatively well-positioned to sell into Asia’s maturing boom.
The report points out that there are now tangible signs that the economy has bottomed out and is starting its slow recovery as shown by the following:
- Unemployment rate starting to trend down amid some better gains on the job front
- Population growth rate starting to pick up as migration to Queensland and WA started to tail off
- The recent surge in dwelling starts may soon fade
Despite the shelving of a number of planned projects including the mammoth Olympic Dam, the number of projects underway is still fairly healthy and in Deloitte’s words “potential abounds”.
These projects include:
- Upgrade of the Port Pirie smelter at a cost of $514 million
- Duplication of the Southern Expressway at $408 million
- Redevelopment of the Lyell McEwin Hospital and Queen Elizabeth Hospital, and the new Royal Adelaide Hospital slated for 2016 are all underway with a combined cost of over $2.1 billion according to Deloitte
Challenges remain
Affordability remains the main driver, according to Linda Phillips, national research manager with Propell.
“While lower interest rates are a welcome incentive, the ongoing ability to make the repayments stems from employment confidence, and local market acceptance.
“Higher unemployment rate, lack of first homebuyer incentives, stamp duty taxation (which is under review), the Holden closure, uncertainty over defence submarine contracts – all these factors are holding growth back,” says Phillips.
“Closure of the Holden site will impact heavily on the northern suburbs. Unemployment is the highest in the nation at 7.3% and it may exceed 8% in the next couple of years,” she says.
“The new state government is taking an intelligent and positive approach to seeking new areas of growth, such as in the uranium sector. Such moves are controversial but may be the catalyst to turn the state economy around.”
Bright spots
“Suburbs such as Parkside, Unley, Goodwood and Mile End remain local favourites. Strengthening performances are also being seen in Prospect, Renown Park and the Bowden/Brompton areas,” Phillips says.
She points out that most suburbs within 10km of the city have been showing increases in value over the past 12 months.
“However, outer areas remain sensitive to household budget constraints such as local petrol pricing and employment. The pending closure of the GMH factory at Elizabeth in 2016/17 is already seeing a slowing down in northern suburb household confidence,” says Phillips.
SUBURB TO WATCH
Toorak Gardens: Inner city suburb shows growth spurt
Known as one of Adelaide’s most desirable suburbs, Toorak Gardens is commended for its beautiful character, turn of the century architecture and excellent location.
Located just 2km east of Adelaide’s CBD, this prestigious suburb is in high demand with a vacancy rate of only 1.01%.
Phil Harris, of Harris Real Estate, says Toorak Gardens provides everything that eastern suburbs family living in Adelaide represents. “Quality character homes, land allotments, large allotments, close to the CBD, prominent schooling nearby, it ticks all the boxes.’’
Harris says the track record of the suburb has shown that even through the tougher markets prices have held and always continue to grow. “They always attract multiple markets so they continue to be more highly sought-after.’’ Apart from the option of a quick walk to the CBD, several shopping centres service the suburb such as Burnside Village, which for many residents ‘’is literally just across the road’’.
Several primary and high schools in the area, along with a medical centre and library, provide families with everything they could need at their fingertips.
Harris says there aren’t any considerable differences in popularity between streets. “There are a few arterial roads that do very well, but generally Toorak Gardens is known for prestigious homes.’’
With many houses pushing the million-dollar mark, units can be an ideal way to gain a footing in an excellent suburb. Two-bedroom units, ideal for young or established couples, on Martindale Avenue and Leader Avenue can be bought for less than $300,000.
