Adelaide Property Market Update December 2020
2020 has been a year like no other, providing more twists and turns than a John Grisham thriller. At the time of writing the February 2020 prediction edition of the Month in Review, COVID-19 had yet to enter our vocabulary. The metropolitan Adelaide market was tipped to enter the new decade on a high after strong growth at the back end of 2019. With rose coloured glasses on, we stated that “with no known market disruptors on the horizon, there is no reason to indicate that this strengthening level of market activity won’t continue into 2020”. This statement has become ever poignant as we unwittingly entered a period of market disruption not seen in generations. So with all that said, here is our year like no other in review.
The hard word was put on the middle ring suburbs of Felixstow, Seaton and Pasadena to perform well through 2020. Both Seaton and Pasadena outperformed their September 2019 quarters with stable transaction numbers and increases in median house prices of 6.34 per cent and 31.15 per cent respectively. Felixstow had an increased level of turnover in the September quarter of 2020 however recorded a 9.66 per cent reduction in the median house price for the same period in 2019. Two correct predictions and the other is just an indication that Felixstow is still providing value for money in comparison to surrounding suburbs. We will give ourselves a B for this prediction.
We stated in February that irrelevant of market conditions, there was always strong demand for character dwellings in the middle and inner rings. Not helping this prediction was the cancellation of auctions which make up the bulk of sales within this market segment. On the back of the auction freeze, stock levels reduced as vendors were spooked that without the competitive nature of an auction, top dollar may not be achieved. What ensued were low stock levels with a still active cohort of buyers. This market dynamic ensured price levels remained relatively stable during the peak of lockdown. Examples of this can be seen in the sales of 3 Collingrove Avenue, Broadview and 5 Opey Avenue, Hyde Park. Both of these properties transacted in January 2020 only to be sold again in June 2020 and August 2020 respectively. Both achieved slight increases in their pre COVID-19 sale prices. Demand remained strong in this market segment even though it was inadvertently helped along by the unusual market conditions at play. We will give ourselves a B+ mark for this prediction.
After strong growth throughout 2019 in the prestige market, the $3 million plus price point was tipped as one to watch in 2020. Sales evidence suggests that transaction numbers in this market segment remained stable with metropolitan Adelaide recording 22 residential transactions above $3 million in 2020, just pipping the 21 transactions achieved in 2019. Interestingly the median sale price for those properties above $3 million was slightly lower in 2020, down from $3.6 million in 2019 to $3.3 million in 2020. Some of 2020’s highest transactions include 411 Esplanade, Henley Beach and 12 Robe Terrace, Medindie which achieved sale prices of $5.68 million and $4,710,888 respectively. The expected bonanza of $3 million plus transactions didn’t eventuate but the market remained stable throughout a period of uncertainty. We will give ourselves a C+ for this prediction.
We tipped that the CBD unit market was one to treat with caution with limited opportunities for capital growth given the abundance of available stock. Corelogic data indicates that the median sale price dipped slightly from $430,000 in September 2019 to $427,500 in August 2020. With a high proportion of investors and overseas purchasers, this market was negatively affected by border restrictions and the fear of a looming property crisis. Interestingly the CBD unit market under performed in comparison to the broad metropolitan unit market which saw the median unit sale price rise from $325,500 in April to $360,000 in November. This prediction turned out to be spot on, so an A+ is in order. Our predictions mostly hit the dartboard with some a bit closer to the bull’s eye than others, but one thing no one could predict in 2020 was how the market was going to respond to the ensuing COVID-19 crisis. In the early stages of the pandemic, there was an initial shock to the market when we saw a reduction in both stock levels and buyer enquiry. As time went on, South Australians began to realise that they were somewhat sheltered from the virus and began to see an uptick in activity. In mid-June, the market appeared to have reached a peak with many pundits questioning how long the rising market could go on. Cause for further concern was the downward cycle the big east coast markets entered which South Australia typically lags behind. Just as things appeared to slow, the September quarter exploded with the South Australian metropolitan median sale price reaching a record high of $492,500. The CoreLogic Hedonic Price Index suggests that this strong growth is going to extend into the December quarter. The rising market can be attributed to a lack of stock, increased buyer activity and record low interest rates.
Forgetting the surprise of COVID-19, we did have some positive surprises in 2020.
Surprise 1: We are on the verge of the highest transaction ever recorded within metropolitan Adelaide with 45 Palmer Place, North Adelaide currently under contract after being listed for sale with an asking price of $10 million plus.
Surprise 2: Regional lifestyle properties remained popular. During the early stages of the pandemic, the regional lifestyle market was tipped to be negatively affected as holiday homes are typically the first to hit the market during times of financial hardship. As the future of both domestic and international travel looked bleak, agents across regional South Australia had an influx of buyer enquiry as South Australians looked to their own back yard for holiday destinations.
Surprise 3: After what feels like years of conjecture, the state government announced that the North-South Corridors Darlington stretch will form a 10.5-kilometre tunnel at a cost of $8.9 billion and creating upwards of 4000 jobs. Once the tunnel is completed, the northern and southern suburbs will be connected by a non-stop 78-kilometre motorway.
The market remained resilient throughout 2020 as experts from far and wide predicted doom and gloom scenarios nationwide. With market fundamentals remaining on shaky ground, there remains uncertainty as to how long the strength in the market can hold. What I am certain about is that I, like many other South Australians, will be standing up at the stroke of midnight on 31 December telling 2020 that this is not see you soon, this is goodbye.
Nick Smerdon
Property Valuer
