Adelaide’s real estate market performance has been somewhat unremarkable over the last 12 months, with values barely moving and sales activity on the slower side.
“During the first half of 2015, demand continued to exceed supply in the inner areas of Adelaide, resulting in a sellers’ market,” says Greville Pabst, CEO and co-founder of WBP Property Group.
As the year wore on, that trend continued, save for one distinct market: the high-end, premium market representing some of Adelaide’s most prestigious suburbs, many of which experienced double-digit growth in 2015.
“Market conditions are still very tight in the ‘blue chip’ inner-eastern and southern suburbs, as stock levels of established homes are at record lows. In particular, well-located period homes are achieving a premium in the marketplace,” Pabst says.
“But perhaps the highest capital growth during 2015 occurred in middle southern suburbs, in part due to zoning changes that allowed for higher-density development in some areas.”
More pain ahead
Overall, there are few opportunities to profit in the short to medium term, with capital growth prospects in the doldrums.
Adelaide’s outer mortgage belt suburbs are suffering the most, in part due to increasing unemployment and an oversupply of new housing. Sales of entry-level investment properties in these areas “have particularly slowed, due to tighter lending restrictions for investors by APRA”, Pabst explains.
“Off-the-plan apartment sales in the CBD also appear to be slowing, despite an increase in the number of projects being released. We expect that prices for... apartments will fall,” he warns.
This sentiment is echoed in the Australian Housing Outlook 2015–2018, prepared by BIS Shrapnel for QBE, which pinpoints a number of factors impacting on the state’s economy.
“Adelaide faces headwinds in key industry sectors, with trade exposed industries such as manufacturing having been weakened by a high Australian dollar. Many people are not in a position to invest in the short term, while automotive manufacturing will be discontinued with the closure of the Holden plant in 2017,” the report states.
It predicts median house price growth of 1.9% in 2016, before rising oversupply and slower economic activity halt price growth in 2017 and induce a 1.1% decline in 2017/18. Units are forecast to perform at a similarly dismal rate, with negative growth of 1% predicted by June 2018.
Top-end suburbs to outperform
While these forecasts relate to the market as a whole, there are a number of micro-economies and micro-markets operating within Adelaide and the broader state.
The more sought after, premium lifestyle suburbs have performed at an above-average rate over the last 12 months, and Alex Ouwens, president of the Real Estate Institute of SA, is confident this trend will continue.
“It is amazing how consistent the top-selling suburbs are quarter to quarter, but it just goes to show how much affordability, potential for growth and investment in infrastructure contribute to their attractiveness to first home buyers and investors,” explains Ouwens.
Some of Adelaide’s regional markets have performed well above the state’s average, he adds, with certain areas seeing value increases of more than 30%.
“Suburbs that have seen the largest growth over a 12-month period are Port Augusta, Renmark and Millicent, with increases of 36.36%, 31.03% and 25.56% respectively,” Ouwens says.
SUBURB TO WATCH
Rose Park: Buyer demand through the roof
It’s certainly not the cheapest suburb in all of Adelaide – with a median of more than $1m, Rose Park is one of the city’s most prestigious suburbs.
But the neighbourhood offers a range of villas and period homes priced from around half a million dollars, which are proving to be popular with owner-occupiers and investors alike, says Hamish Will, auctioneer and salesperson at Harcourts Brock Williams in Adelaide.
“The top end of the market is going very strong. It’s definitely a vendors’ market, as there are a lot of buyers ready to buy, including a mix of locals, interstate and eastern seaboard buyers, as well as buyers from offshore in China and India,” explains Will.
“They love a villa – a Victorian villa in a city fringe location is in high demand. I’m marketing one in Hewitt Avenue, Rose Park, at the moment and we’re just getting rushed off our feet.”
Auctions have proven a popular strategy for vendors keen to secure a strong price, but some two- and three-bedroom homes in the area are still offered for private treaty sale.
“There is a shortage of stock and a real supply and demand issue,” Will adds. “There are more people than houses, so I think it will continue to go very strongly.”
