The month in review: Adelaide
By Herron Todd White
June, 2010
In broad terms the Adelaide residential property market
has continued to steadily move ahead during times
of uncertainty caused by the Global Financial Crisis
(GFC), interest rate increases and a lower volume of
transactions.
Many were predicting a slump in demand for residential
properties, especially in the outer or newly developed
areas, after the First Home Owners Grant Boost was
removed in late 2009. However this does not appear to
have occurred. While much of the demand for housing
was ‘brought forward’ in order to beat the October cut
off for the boost, demand levels and property values
appear to have remained stable. A good example of this
is the suburb of Morphett Vale to the south of Adelaide.
Within this suburb there are a large number of entry point
properties and demand for the lower priced properties
is strong from first home-buyers. Rents for properties
within the suburb have also increased. As the rental
returns increase it is likely that investors will again enter
the market looking at less risky investments, particularly
given the recent share market turmoil.
Possibly of more immediate concern to residential
property owners is the future of interest rates. The
perception is that many buyers, including recipients of
the Home Owners Boost, have extended themselves fully
in order to secure the best possible property, making
themselves vulnerable to increased borrowing costs.
At this time the evidence of is only anecdotal, however
further interest rate rises are likely to result in a number
of these properties being offered to the market as the
mortgage pressure becomes unmanageable.
There are signs of optimism returning to the residential
property market. There is a growing perception that the
worst of the GFC is behind us and that it is safe to come
out of hiding. There is lingering unease as economic
woes continue in the Euro Zone and locally with the RBA
predicting further interest rate rises.
Developers are generally doing their homework and
constructing dwelling types that are in demand.
Competitive pressure on land values has seen developers
increase dwelling densities to make projects more
profitable. For example, south of the Adelaide CBD in
suburbs such as Sturt, Dover Gardens and Seacombe
Gardens there have been high levels of redevelopment,
and developers who are active in these areas are building
products to meet the market needs.
Historically developers constructed mostly single level
dwellings, while recently two storey dwellings are
becoming more popular. This is really a combination of
a number of factors such as increased demand for land
in prime locations, and acceptance by the market. There
have been a few developments where the dwellings are
not suitable for the area, however where this has occurred
it is mainly due to dwellings being over priced.
The $1.5 million-plus market pretty much stopped
through 2008 and the volume of sales were also down on
previous years, while the $700,000 to $1.3 million saw a
small correction through this time. There were a smaller
number of buyers active in the market and selling periods
were longer than had previously been experienced. In
recent times, demand for good properties within upper
price bracket has returned and is just as strong as pre-
2008, generally in prestige locations to the inner suburbs
of Adelaide, including Unley and North Adelaide and the
coastal strip from Semaphore to Seacliff. Some of these
properties have exceeded value expectations when
selling at auction.
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