Thanks to South Australia’s economic woes, Adelaide’s market is plodding along at a slow pace – but changing perceptions could help improve the situation
Poor old Adelaide has long labored under the genteel, but unexciting, moniker of “city of churches”. But progressive infrastructure-related changes mean the times, they are a-changing – and so are perceptions of Adelaide.
Last year the city scored a number five spot on the Economist Intelligence Unit Global Liveability Index 2014. Now, the New York Times has named South Australia’s capital one of its top “places to go” in 2015.
BIS Shrapnel senior research analyst Angie Zigomanis says that, while it is intangible, the effect of changing perceptions could impact favourably on the city’s flat property market.
“It might slow down the amount of people moving out from Adelaide to eastern states,” he says. “It might also increase the number of people migrating to Adelaide.”
Economic struggles
Unfortunately, the city is suffering from the impact of the significant economic headwinds – in particular, a struggling manufacturing sector – which are plaguing the state.
Adelaide lacks the type of economic and employment opportunities that attract the Gen Y / Millennial demographic, Zigomanis says. “Arguably, that demographic wants to do exciting jobs in sectors like finance and IT – and South Australia doesn’t have a good base for those. This is a big negative.”
Yet, as a place to live, Adelaide is an increasingly attractive option, he says.
Not only has the state government been modernising its public transport system, but the redevelopment of the city’s oval has generated an exciting buzz, and some good cultural events have been developed. Further, it is not congested, and it is affordable. But the current lack of strong industry drivers to attract people to work is a major problem.
In the latest CommSec State of the States report, South Australia is ranked seventh on economic performance – despite coming in third on population growth and in the middle on unemployment.
It all sounds a bit bleak, but Zigomanis says some economic positives can be found in the state’s solid overseas migration rate; the falling Australian dollar, which should benefit the agricultural sector; a strong overseas student sector; and the ever-present spectre of the Olympic Dam project, which will happen one day.
Slow growth for market
While these issues loom over Adelaide’s property market, some price growth is going on.
According to the latest CoreLogic RP Data Home Value Index, Adelaide’s dwelling values increased by 1.8% in December 2014. There was growth of just 0.4% in the final quarter of the year, but year-on-year it recorded a solid 4.3%.
However, Zigomanis says he would forecast just 2% to 3% growth over the coming year.
This is because of the impact of state government incentives on the new build sector of the market. When they hit in, the slightly oversupplied market was starting to correct itself.
“Suddenly there was a big incentive to build more,” he says. “So just when the market would have been pushing into an upturn, any pick-up is probably delayed now because of all the new stock from new builds.” The situation does mean that, for investors with a long-term view, there are buying opportunities to be had, he concedes.
New REISA president Greg Moulton has a more optimistic view of the current state of the market.
He says the Valuer General’s data for the December 2014 quarter shows a 5% increase in volume of sales and a 3.16% increase in median price. The data also shows a 3.91% increase in median price over the same period last year.
“The median house price in Adelaide is now at $425,000, which is the highest recorded median on record. The change is fantastic and shows quite clearly the underlying strength of the market.”
Call for stamp duty review
Meanwhile, industry groups are calling for a review of stamp duty costs after recent ABS data showed South Australia housing approvals fell (by 1.1%) in November.
Property Council SA division executive director Daniel Gannon told media that SA’s property taxation system was a “disease on economic growth” that discouraged people from building.
“Abolishing stamp duty is critical to encouraging greater productivity and job creation in South Australia’s economy, particularly as the rate of overall homeownership is in slow decline.”
SUBURB TO WATCH
Woodville: Redevelopment brings brighter future
After some decades of decline, the future of once-vibrant Woodville has started to look brighter. Thanks to its proximity to the Adelaide CBD and affordable prices, interest in the suburb is on the rise – and should increase.
Woodville Village has been tagged to be one of greater Adelaide’s significant transit-oriented development areas. As such, it is expected to undergo major change and revitalization in the years to come.
The local council’s related master plan for Woodville Village includes considerable infrastructure development, along with the transformation of the main street into the area’s “civic and retail heart”. Upgrades for Woodville Station and nearby Queen Elizabeth Hospital are also in the works.
These factors should act as economic and employment drivers for the area – and can only benefit Woodville’s already improving property market. Properties are spending less time on the market, while RP Data gives its latest 12-month growth figure as 12%.
A steady rental market has long been a characteristic of Woodville. The current vacancy rate is 1.88%. As the predictions of job and population growth bear fruit, demand is only likely to get tighter.
While the area is known for its fine examples of colonial and federation architecture, it is the newer multi-bedroom and -bathroom properties with garages that are most in demand.
Due to their convenient locations, Belmore Terrace, Bower St and Stanley St are popular streets to buy in.
