Looming economic woes and low migration rates leave Adelaide’s growth potential up in the air
Adelaide has had a rough few years, and unfortunately this trend looks to continue into the next five years.
“That’s a very low capital growth city in general, and the rationale behind that is net migration over the last 30 years realistically has been almost zero. So there’s been an equal amount of people leaving as there has been coming to that city,” says Paul Glossop, director of Pure Property Investment.
“It has created an issue with any additional demand in that market. No data that we’ve seen really suggests there’s going to be anything to heighten Adelaide as a higher-demand area for people looking for jobs, especially with the Elizabeth and Holden manufacturing plant closures.”
These closures are set to take effect in 2018, which means the repercussions are likely to be felt all the way into 2019 and beyond, particularly in the middle- and outer-ring suburbs. With limited jobs available, there has been good reason for young people to jump ship.
“That’s a market we aren’t buying in, and nor do we see much opportunity in that market over the next five years,” Glossop concludes.
Property market shows resilience
However, Gregg Harris, general manager of NAB Retail, sees a different story developing.
“The latest NAB Residential Property Index saw sentiment increase by 42 points in South Australia, putting it behind only the burgeoning eastern states of Victoria and New South Wales. These results paint a picture of a very resilient market despite the noted headwinds,” Harris says.
This could translate to positive long-term performance if confidence levels continue to rise, especially in inner-city suburbs.
In its Month in Review for May 2017, Herron Todd White agrees that sentiment is vital to the market, and inner-city suburbs are enjoying the benefits at present. As a whole, Adelaide is showing stability despite the coming storms due to the commencement of infrastructure projects.“The Adelaide market continues to be consistently stable. Sub-markets with limited supply continue to be strong,” the HTW report states.
Amenities facilitate demand
HTW has been taking note of the increased developer activity in areas that have undergone zoning changes within the past two years. Adelaide buyers tend to go for detached housing; therefore rising infill and high-density developments could affect the market.
Low supply has been working in Adelaide’s favour, with well-serviced suburbs seeing strong demand. Henley Beach and Grange remain popular with buyers, and Port Noarlunga’s proximity to the Southern Expressway underpins its success.
SUBURB TO WATCH
BURNSIDE: Bright spot in a pessimistic market
Despite Adelaide’s pessimistic market outlook, there are still some bright spots in the area.
“For buyers wanting a nearly assured return on their investment, Burnside is the hottest property in town,” says Gregg Harris, general manager of NAB Retail.
“The leafy eastern suburb’s median profit margin of $202,500 was the highest in the state for the quarter ending December 2016, according to CoreLogic data.”
This suggests the suburb is experiencing much demand, even with prices dropping. For the unit market, this could be due in part to the median apartment price being below $450,000. Moreover, Burnside is just a 15-minute drive from Adelaide, making it a highly convenient location.
