The month in review: Adelaide
By Herron Todd White
October, 2009
High volume project developments remain problematic
in Adelaide.
Newport Quays – a ‘mid range to prestige’ waterfront
residential and marina development at Port Adelaide
probably stands out currently as the poor performer.
Earlier this year incentives including a BMW, boat or
interest free period were offered in order to generate
interest in the project – with little avail. There was always
a degree of uncertainty as to whether this development
would be a success and unfortunately the timing of
recent economic turmoil combined with this to have a
strong negative impact.
The Port Adelaide area has long been in a period of
transition, as an older area and also traditionally a major
industrial/commercial area, the area is dominated by
businesses generally operating Monday to Friday. There
are numerous older buildings/vacant sites awaiting
redevelopment or upgrade and many are derelict. With
a limited residential sector there has never been the
growth of a popular café/restaurant, boutique retail
type strip or area that is so appealing to the market that
Newport Quays is being aimed at. Another potential issue
to consider is that whilst the waterfront position of the
development provides an interesting outlook, access to
the open sea from the marina would take a journey of
over an hour.
Whilst the idea of the development and of creating a‘Southbank’ or “Docklands’ like area has much potential,
it appears as though Port Adelaide was not ready for
something of this magnitude, especially in this price
bracket at this point in time.
The high density apartment markets of Glenelg and the
Adelaide CBD are both currently underperforming - more
than likely as a result of oversupply.
In Adelaide there are two issues to be mindful of at present.
The first is the First Home Owners Grant which has been
responsible for inflating the current market. With the
reduction of this grant at the end of the month, demand
is likely to decrease and this may impact negatively
on prices. The second is that this market is somewhat
dominated by student accommodation, with apartments
being very small (in some cases sub 25m2). If there is a
decrease in international students coming to Adelaide to
study, the concern is that these purpose built apartments
with very small living areas and limited kitchen facilities
would be unsuitable for owner occupation, not to
mention unappealing.
The Glenelg apartment market continues to have an over
supply of apartments with some having been on the
market for in excess of 12 months. This is not limited to
the well publicised Liberty Towers development where in
most instances resale prices have not met initial purchase
prices. There are a number of apartments within the
Holdfast Shores development, mainly in the Platinum
building which were purchased at the peak of the market
in 2005 through to 2007, and have experienced extended
selling periods eventually selling at similar prices or
slightly below initial sale prices.
The house and land package market, particularly in the
northern suburbs of Adelaide is currently doing well...
however this area needs to be red flagged for several
reasons.
The driving factor behind this market is the First Home
Owners Grant Boost (especially the large incentive of
$25,000 for new construction). This in combination with
the lowest ever interest rates resulted in premium prices
for the land as it was made available and also premium
prices for buildings. As the Grant is to reduce at the end
of the month, the assumption is that the market will drop
back accordingly to meet that retraction.
The next issue to note is that dwellings in new areas that
have not been fully established (eg. no landscaping,
paving, floor coverings or air conditioning) achieve prices
well below those of fully established dwellings and also
often below the initial land and building costs.
With interest rates set to rise, more than likely before the
year is out and out of line with the official Reserve Bank
rates, it is assumed that this section of the market will be
hardest hit - especially as unemployment also continues
to increase.
The market for million dollar plus properties in inner city
locations, North Adelaide, beachside suburbs and along
Esplanades has been very flat of late. Selling periods have
increased, there is a reduced number of buyers active in
the market and the premium prices achieved in recent
years appear to have contracted between 10-20%. At
this stage it appears as though vendors are unwilling to
reduce prices in order to achieve sales and are opting to
hold onto properties rather than sell.
Brompton is an inner north western suburb within
Adelaide that although not poorly performing has
historically not been a sought after location. It is less
than 4 kilometers from the CBD and 2 kilometers from
cosmopolitan North Adelaide. This suburb historically
contained a large number of industrial properties and
low quality housing. There has been major Government
expenditure in this suburb and a large volume of land is
now being offered for sale (some of which is suitable for
high density development). At present a large number
of townhouses are being constructed or have recently
been sold, with further dwellings proposed. With new
reserves and more dwellings being completed the area
is changing and is becoming popular with young couples
looking to purchase close to North Adelaide. A tram line
is being extended to the adjoining suburb which will
further increase the already excellent public transport to
the area.
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