New leadership boosts confidence in SA's economic prospects, while the slowdown in Sydney and Melbourne drives interest in Adelaide
While it remains in the middle of the pack compared to the other Australian states, the Adelaide market has spent some time fighting a languishing economy following the departure of manufacturing firms from the area. However, recent political changes suggest a more positive outlook for this city.
“Since the new government was elected in March this year there has been a surge in confidence in the economy,” says Pat Gerace, CEO of the Urban Development Institute of Australia SA.
“The change brought excitement, and a pro-growth agenda by the new government has given the business community some inspiration for the immediate future. [The government] has also opened up the possibility of rezoning corridors in parts of Adelaide’s western suburbs for more infill housing.”
The rezoning initiative was introduced by the previous government. However, stamp duty reform plans could affect demand and supply.
“It’s likely that several projects could suffer a slowdown in demand, and this might contribute to some projects not proceeding to the construction stage,” Gerace says.
“Disappointingly, it may also lock out some first home owners who without the exemption would not be able to enter the market.”
Adelaide feeds off buyers' shifting insterests
With Sydney hitting a wall recently, Adelaide looks to benefit from buyers turning their attention to the smaller Australian markets.
“In terms of market conditions, one thing that is noticeable in Adelaide is that whenever the market on the eastern seaboard begins to cool, national developers’ interests increase in smaller projects that might have previously been overlooked because of their scale. Signs of this are starting to emerge,” says Gerace.
As of the end of May 2018, the average demand-to-supply ratio for Adelaide indicates that demand remains ahead of supply.
“The state government has been working hard to improve the SA economy. Negatives such as the closure of car plants have highlighted that the city actually has quite decent economic diversity,” says Jeremy Sheppard, director of research at Empower Wealth.
“It didn’t have the big drag on prices some commentators assumed it would. Confidence of economic resilience and continued employment is building among homebuyers. Auction clearance rates were quite high for Adelaide in May. And the number of people searching online for properties was also quite high.”
SUBURB TO WATCH
UNDERDALE: Units show strong growth
Situated near the River Torrens, the suburb of Underdale powers on following steady growth since 2013.
Units are affordable at a median price of $331,455, after 6% growth in the 12 months to May 2018. Such properties also provide a reasonably high average yield of 4.2% for landlords from a weekly rental rate of $295.
Houses also performed strongly, although growth was not as high as that of units. Houses spend an average of just 40 days on the market and sell at an average discount of 2.2%. However, the median rental rate dropped by 2.4% to $400 in the year to March 2018, suggesting that the rental market has weakened.
Growth: The market as a whole enjoyed growth over the past five years
Affordability: Apartments are priced low, at a median or under $350,000
