The month in review: Adelaide
By Herron Todd White
September, 2009
Comparison of the volume of residential (house) sales in
the Adelaide metropolitan area over the last three years
shows a steady decline. This confirms the widely held
view that the market has slowed considerably across the
board, initially as a result of tightening fiscal policy but
more recently as a result of global economic turmoil.
A closer look at the sectors within the comparison shows
that the decline is largely due to a reduction in the
number of sales in the ‘budget’ sector (<$500,000). This
sector dominates the statistics and accounts for in excess
of 80% of the data for each of the last three years. It is also
the sector that is most affected by the current economic
climate, rising unemployment rates and tightening of
lending requirements.
Another factor that may have contributed to the decline
in sales in the first quarter of 2009 is the First Home
Owners Grant Boost which has encouraged the building
of new homes in preference to the purchase of existing
properties. As the First Home Owner Grant is wound back
to $7,000 in September, there is speculation that the
volume of house sales will slow further, although interest
rates and unemployment rates are likely to have a greater
impact on the housing market in South Australia.
The volume of sales in middle ($500,000-$1m) and
prestige ($1m+) categories have stayed remarkably
similar over the last three years with the exception of a
minor increase in 2008. The proportion of sales in the mid
range has steadily increased from around 13% to 16%
of the total. This is possibly attributable to the value of
houses increasing generally during this time and moving
between the various sectors – this may also account for
some of the decrease in volume in the budget sector.
An interesting element to the data is to note the
movement of the average house price within each of
these sectors as illustrated in the graph above.
The data confirms the observation that residential house
values in the medium and upper brackets across the
Adelaide metropolitan area are stabilizing.
Values at the lower end of the market have held their
2008 values due to the current low interest rates in
combination with the First Home Owners Grant and
Boost. This sector is also the most volatile and is the mostly
likely to be impacted by increasing unemployment rates
and increases in the cash lending rate.
South Australians have the lowest average mortgages in
the country, well below the national average. Coupled
with historically low interest rates and the relatively stable
housing market allows consumers to feel a certain level of
security and therefore provides more inclination to spend
rather than save discretionary income.
The biggest impact therefore on our retail sector is more
than likely to be an increase in the mortgage lender rates
which are widely expected to occur towards the end
of this year. This may be the result of fiscal policy or an
autonomous decision by the banks.
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