With large scale mining expansion on the horizon, limited land release, the increase to the First Home Owners’ Grant, steady immigration and a high demand for rental property, the SA market should withstand a slow down.
Adelaide
After a 3 per cent decline in 2008/09, it is expected growth for Adelaide’s median house price to improve by 3 per cent in 2009/10.
Rapidly rising interest rates over August 2007 to March 2008 negatively impacted on affordability and purchaser activity.
The median house price in Adelaide remained stable at $360,000, a 0.7 per cent drop for the December quarter, but a 1.4 per cent jump over the last 12 months.
A reduction in sales volumes shows buyers are still cautious when entering the property market. However, the combination of low interest rates and stable property prices should revive confidence in the market in 2009.
Activity weakened through 2008 as the financial crisis saw economic growth slow and employment prospects weaken.
In early 2009, Adelaide house prices are expected to rebound from a modest slide in the latter half of 2008, on the back of robust first home buyer activity in the first half of 2009. Adelaide’s blue ribbon suburbs such as Unley, Malvern and Toorak Gardens are forecast to continue their upward trend in 2009. These suburbs registered between 6 and 12 per cent jumps in property values for the 12 months to the end of 2008.
Seaside suburbs experienced significant price growth over the past 12 months. Brighton, West Lakes, Somerton Park and Grange all experienced considerable rises to their median house prices over the past year of more than 25 per cent.
The South Australian median house price experienced a 4 per cent increase over the past year. Affordability levels are expected to improve from the low of 2008 and rising unemployment is likely to emerge as a major factor in price growth over the two years to 2009/10.
As the economy stabilises and picks up in 2010/11, unemployment rates are expected to improve. Rents will only moderately increase as the deficiency in Adelaide is not expected to increase significantly.
Demand is also expected to moderate with net overseas migration levels falling throughout the forecast period to June 2011.
Adelaide is one of the most affordable capital cities in Australia, based on home loan repayments as a percentage of earnings. Although affordability is forecast to remain highly favourable, it is not expected to stimulate another rapid increase in price growth similar to the one earlier on in the decade, due to the absence of a significantly rising dwelling deficiency.
Regional
The regional property market as a whole stood strong against the effects of the global financial crisis, remaining steady while other financial markets experienced significant declines. Price falls in rural areas reflect a lack of transactions.
The Riverland was the stand out performer in country South Australia over the past 12 months, with median house prices in Renmark and surrounding towns growing by more than 11 per cent.
Home prices in Port Augusta and Whyalla slowed over the 12 months, as a result of the marketcorrecting itself after a period of frenetic growth.
The south east of the state will remain popular, however if things tighten up, it will be the hobby farm and beach house that go first.
It is predicted Burra and Gladstone will see price gains of 16 per cent.
Commercial and Rental
Investors are returning to the reliability of bricks and mortar, taking comfort in the fact that over the last 40 years, South Australian house prices have remained relatively stable through thick and thin.
For the year October 2007 to October 2008, Adelaide (6.9 per cent), along with Darwin (6.5 per cent), was considered the best performer in terms of property value growth.
Inner city Adelaide is proving to be the pocket rocket of the Australian apartment market, with sections of the city experiencing hefty price growth as other housing markets languish.
Most recent figures (June 2008) show Adelaide’s close-in suburbs of Evandale, Kurralta Park, Findon,Forestville and Kensington ranged between 49.3 and 42.3 per cent growth for the year.
The strength in Adelaide’s apartment market continued through the September quarter with median apartment prices staying steady at $275,000.
The affordability of units is really starting to become quite attractive to buyers in Adelaide, a trend that has occurred in the majority of capital cities in Australia. Units generally become a more attractive alternative when the cost of housing is unaffordable.
Capital growth suburbs for apartments at June 2008 in South Australia include Evandale, Kurralta Park, Findon, Forestville and Kensington.
Adelaide recorded a fall in rental yields of 0.06 per cent during the last year.
Growth in rents for Adelaide were 4 per cent in 2007 and 4.9 per cent in 2008, highlighting Adelaide’s tight rental market since 2003, with vacancy rates being largely 2 per cent during this time. Rents are forecast to rise by a total of 15 per cent in the 2008 to 2011 period for Adelaide.
Vacancy rates fell from just under 2 per cent from March quarter 2003 to September quarter 2006, to below 1 per cent in the following two quarters, before easing slightly to 1.5 per cent in June quarter 2008.
Rental growth in Adelaide has been solid over the five years to June 2008, having risen by a total of 42 per cent in the period. While vacancy rates remain low (easing to 1.56 per cent in December for metropolitan Adelaide), investor finance data suggests there is an improvement in investor activity taking place. Similarly, new dwelling construction has been running at a similar pace to underlying demand. This would indicate easing pressure on rents, with rents forecast to rise by a total of 15 per cent in 2008 to 2011.
Many property managers experienced a high level of tenant enquiry in the lead up to the new year as many people set themselves up for the year ahead. This momentum continued into January as an influx of university students enters the market.
Vacancy rates in the Adelaide residential rental market stabilised during the December 2008 quarter at a tight 1.2 per cent.
Indicative rental yields in Adelaide fell to a low of 3.8 per cent at June 2008 and there are expectations they will edge upwards to 4.2 per cent at June 2009 - although this is low in a long term sense - before stabilising at that level during the remainder of the forecast period to 2011.
Hot Spots
North Adelaide will continue to be one of the state’s hot spots and is expected to jump 6 per cent due to its good supply of everything from well-priced units to million dollar mansions.
Port Pirie West, within the Port Pirie township is South Australia’s most affordable waterfront location, with a median house price of $140,000. Other locations include:
• Ceduna with a median house price of $164,250
• Port Macdonnell with a median house price of $165,750
• Clinton with a median house price of $198,750
• Cape Jervis with a median house price of $206,000
Regional suburbs likely to outperform during 2009 include:
• Mount Barker, located in the Adelaide Hills, offers buyers a tree-change location within a very easy commute to a capital city. The region is currently one of the state’s fastest growing and has a median house price of just $343,000. It has an abundance of amenities with many shops and cinemas as well as the usual restaurants and bars.
• Hayborough is the most affordable suburb in which to purchase a house within the Victor Harbor Local Government Area of South Australia. It has a median house price of $299,000 and is located less than 70 kilometres south of Adelaide, sitting on the oceanfront.
SOURCES:
BIS Shrapnel – Residential Property Prospects 2008-11
BIS Shrapnel – December Update (Residential Property Prospects 2008-11)
Real Estate Institute of Australia (REIA) Focus Group Final Report
REIA – Media Release “Signs of Positive Activity in the First Home Owners Market,
Let’s Keep it Going (10 January 2009)
Real Estate Institute of Tasmania (REIT)
November, Tasmanian Property Market (23 December 2008)
REIT – Tasmanian first home buyers up 10 per cent in December, 2 February 2009
Real Estate Institute of Victoria (REIV) – State of the Market
RPData – Top Performing Rental Yield Areas
RP Data Media Releases – Property Hotspots for 2009 (26 December 2008)
Property Pulse – Industry Market Wrap Up
Macquarie Real Estate Economic Research
Weekend Australian Financial Review (Weekend AFR) articles over November and December 2008
Sunday Tasmanian, Boon in Burnie’s Upper Echelons (4 January 2009)
Money, Your Home – Property Outlook 2009-01-14
BRW – Top 500 Private Companies, August 28-October 1 2008
BRW – November 6-12 2008
The Australian, Darwin Goes Through the Roof as Rental Hotspot (26 January 2009)
Realestate.com.au – Rental Yield 2009 Winners
The Australian Financial Review – Special Report (January 23-26, 2009)
Real Estate Institute of South Australia Market Update – SA Property Market
Reliable in Long Term (23 January 2009)
Disclaimer: There are many uncertainties in forecasting movements in the market such as government policy changes, interest rate changes and global economies. Therefore, the forecasts in this report should be taken to be indicative of market directions. First National takes no responsibility for actions taken on the basis of this report and we encourage all vendors and buyers to conduct their own research.
Commercial Property Outlook 2009 - South Australia 
