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Adelaide housing still affordable?
Jo-ann Hodgson looks at how population growth is affecting affordabily in Adelaide’s property market by pushing up house prices in the capital city of South Australia
South Australia has recently been receiving a larger number of overseas migrants and inter-state immigrants than in any previous decade, threatening the affordable property prices in part responsible for the population growth.
Industry analyst BIS Shrapnel recently noted that the Adelaide property market is the most affordable of Australia's capital cities, a fact promoted by the government of South Australia in eastern states via advertising campaigns Author of BIS Shrapnel's Residential Property Prospects report, Angie Zigomanis, recently commented on other variables that are attracting new buyers to the state, Adelaide in particular, and having their effect on property prices. She told News Ltd that: "If defence contracts [a contractor concerned with the development and manufacture of systems of defence] and further investment in the mining sector continue to bring more people to the state, that's only a plus for the residential property market."
Indeed, this increased demand has seen house prices shoot up dramatically in 2007 compared to their performance of recent years. According to Australian Property Monitors (APM): "The Adelaide market for houses and units is strong," with annual growth figures for houses at 9.8 per cent and units at 8.3 per cent. This growth margin is considerably wider than two years ago when Adelaide's median house price growth slowed to just 4 per cent. Indeed, the current property market is looking much more healthy. According to APM, unit prices grew by 4 per cent and houses prices by 4.5 per cent during the last quarter alone. They also note that auction clearance rates are regularly over 75 per cent. Echoing these growth trends, John Edwards from Residex recently told the Australian Financial Review that sales activity had increased by 21 per cent in just 12 months. While this increased demand is good news for property developers and agents, however, the affordability that has placed Adelaide so favourably on the map with property buyers from other states, and even other countries, is being seriously questioned.
Median house prices have leapt from AUS$142,200 in 2001 to AUS$300,00, meaning that many first-time buyers will still struggle to climb the first rung of the property ladder. Zigomanis says that growth in rents is expected to outpace property price growth in the next three years, stating that "in the rental markets vacancy rates are very, very low and we are seeing a pick-up in rental growth, which means yields will improve and bring back investors." This increase in rental demand becomes ever more likely if predictions that Adelaide will see a total growth in its median house price of 16 per cent over the three years – up to June 2010 with price growth accelerating towards the end of this period – are to be believed.
Australian Property Monitors says that Adelaide could expect strong growth throughout 2007 in excess of 10 per cent for the calendar year. However, BIS Shrapnel author Jason Anderson recently told ABC news that whilst prices will undoubtedly rise in Adelaide, it would remain a comparatively cheap Australian city destination for property buyers. "The price growth for property in Adelaide will probably outstrip that of the eastern capitals over the next few years," he said. "But we're moving from a point where the gap is still quite large so I think that gap will close, but it'll still remain a more affordable location."
For those interested in investment opportunities in South Australia's capital city, experts in The Australian newspaper recently included Elizabeth and Mt Barker among the Australia's best investment hotspots. The median entry price for a house in Elizabeth remains low, at just AUS$145,000, with average ten-year annual growth of a healthy 7.8 per cent.
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