The Smartline Report – February Edition

The month in review: Adelaide

By Herron Todd White
February 2016

The residential market in South Australia remains stable with recent reports indicating that year on year growth in values has been very low. The past 12 months figures show total dwelling values have remained virtually unchanged. This is below the annualised rate for the past five years which is 0.4% per annum. These figures are general but indicate some stability in recent times but overall a flat market. Rental growth for both houses and units is negligible in Adelaide and gross yields are in line with the national average at around 4.2%. Transaction numbers have also increased year on year and are in line with most other states at 3.7% higher (CoreLogic RP DATA January 2016).

We continue to see signs of improved consumer sentiment across several sectors. Activity is steady with overall stronger interest in the inner suburban markets and steady but patchy conditions in outer suburbs. In some instances moderately reduced marketing periods are evident. The stable interest rates are expected to support ongoing confidence in the market and may contribute to an increase in demand generally. Recent reports also suggest greater owner-occupied mortgage demand with investor demand falling slightly over the last quarter of 2015.

The market in Adelaide is currently buoyant and there is limited opportunity for purchasers to tap into inner (prestige) suburban markets without having to pay premium prices.

The looming closure of the Holden Manufacturing plant in Elizabeth in 2017 will likely provide challenging conditions for the Adelaide economy and potentially the property market in the outer northern suburbs.

We have listed below the suburbs that we feel are worth watching this year:

Clarence Gardens
Situated within seven kilometres of the Adelaide CBD, Clarence Gardens incorporates predominantly detached housing including character style dwellings. Located close to local shopping facilities and within proximity of trains to Adelaide CBD.

Situated within 16 kilometres of the Adelaide CBD, Modbury incorporates predominantly detached housing with a recent increase in in-fill development. Well serviced area including shopping facilities and within proximity of the O-Bahn to Adelaide CBD.

Situated within 17 kilometres of the Adelaide CBD, Ridgehaven incorporates predominantly detached housing with a recent increase in in-fill development. Well serviced area including shopping facilities and within proximity of the O-Bahn to Adelaide CBD.

Dernancourt is situated within 12 kilometres of the Adelaide CBD and incorporates predominantly detached housing with a recent increase in in-fill development. Well serviced area including shopping facilities and within proximity of the O-Bahn to Adelaide CBD as well as proximity to the Linear Park.

Clearview is situated 11 kilometres north of the Adelaide CBD and is currently experiencing increasing in-fill development as older housing is demolished to make way for newer housing stock.

Payneham South
Payneham South is situated six kilometres from the Adelaide CBD and incorporates a mix of strata developments, conventional style dwellings and character style dwellings. The area provides shopping facilities, local schools and is also situated within close proximity of Norwood, a local café and shopping precinct.

Richmond is situated five kilometres west of the Adelaide CBD. Although surrounded by a mix of industrial and commercial properties, Richmond is becoming increasingly popular with owner occupiers and investors due to its proximity to the CBD, beach and local services and facilities.

Devon Park
Situated within six kilometres of the Adelaide CBD, Devon Park is adjacent the popular suburb of Prospect and within close proximity of the North Adelaide café and restaurant precinct. A passenger train line runs the boundary of the suburb providing good accessibility to the city.

Detached housing below the median price of $440,000 is worth watching this year, particularly within 15 kilometres of the CBD and within close proximity to public transport.

Clarence Gardens provides a more affordable option than the surrounding suburbs of Clarence Park, Cumberland Park and Colonel Light Gardens.

Modbury and Ridgehaven are currently undergoing gentrification and particularly within Modbury, recent zoning changes are providing increasing development potential for investors and developers. These areas also still provide entry level opportunities for first home buyers.

Dernancourt has good access to the CBD via the O-Bahn bus and is an area well serviced by local shopping facilities and schools.

Clearview is within proximity of the Lightsview development and undergoing increasing in-fill development. It is an affordable alternative to the surrounding suburbs of Broadview, Sefton Park and Prospect and still provides entry level opportunities for first home buyers.

Payneham South is adjacent to the sought after suburbs of Evandale, Stepney and Trinity Gardens and is well located within close proximity of the Norwood café and shopping precinct as well as local shopping, schools and parks.

Richmond is another area of increasing ongoing gentrification, located close to the sought after suburbs of Mile End and Torrensville and is an increasingly popular suburb located between the city and the sea.

Devon Park is adjacent to the popular suburbs of Prospect and Brompton. The new development underway in Bowden is increasing interest within the inner north-western fringe of the Adelaide CBD. The area is close to North Adelaide, providing easy access by train to the Adelaide CBD.

Ingle Farm in the north-eastern suburbs, Clearview in the northern suburbs and Croydon Park in the north-western suburbs are all situated within 12 kilometres of the Adelaide CBD. These suburbs provide opportunities below the Adelaide median house price of $440,000. Ingle Farm is situated within close proximity of Windsor Gardens which has become increasingly popular, Clearview is close to the Lightsview development at Northgate and Croydon Park is adjacent to the popular suburbs of Croydon and West Croydon, particularly the Queen Street café precinct.

There are some property types and price points that should be treated with caution and these include Penfield; Andrews Farm; Munno Para and Munno Para West. Given the ongoing land releases, there is increasing oversupply of land and housing which is less than five years old.

Overall inner city suburbs adjoining highly desired areas are appealing to buyers as they offer the opportunity to be amongst neighbouring areas without having to pay a premium.

Factors underpinning long term growth include proximity to the CBD and the beach. In the beach side and inner suburban areas infrastructure is in place and considered to be good. Outer metropolitan areas are benefitting from developing infrastructure including shopping facilities.

The road networks have improved to the outer northern areas and to Seaford in the south. There is ongoing investment to improve South Road. The Torrens to Torrens section of the road is considered to improve travelling times along the road. This improvement is unlikely to benefit any specific suburb with the greatest benefit likely to be for industry with improved travelling times and ease of movement.

The Darlington upgrade should see travelling times reduced to the southern suburbs. This is further likely to benefit the previous improvements to the rail infrastructure and Southern Expressway expansion.

Mount Gambier
In Mount Gambier the outlook for 2016 is that the property market will remain relatively stable throughout the year. We are not aware of any obvious indicators that will have a significant impact on the local economy or the property sector. 2015 provided a few positives for the property market, including the roll out of the new James Morrison Academy of Music and Government funding for the local timber mills, however, these did not have a significant impact on the market, with sales decreasing slightly and no significant increase in values.

The number of house sales within the $300,000 to $450,000 price range for the past nine years. There was a significant drop in 2011 when the market dropped, however an increase in sales can be seen in recent years, reaching where they were back in 2007. This may be something to watch this year to see if sales within this range continue to increase.

There has been an increase in the past 12 months of properties that have achieved a value within the $300,000 to $450,000 price range. There are few dwellings purchased for under $150,000 or over $500,000. Dwellings under $150,000 are generally in less sought after locations and have limited market activity. Units are often within this price range. Dwellings over $500,000 are at the top end of the market and have a reduced market segment.

The $200,000 to $250,000 price range is affordable and is where the most number of sales occur. A house within this range appeals to families and is generally of good quality, including 3- to 4-bedrooms, 2-bathrooms, a double garage under the main roof and a pergola area, situated on 700 to 800 square metres. In other cities such as Adelaide, $250,000 will generally get you a small 2-bedroom, 1-bathroom unit or house situated on a small allotment of around 200 square metres.

Regional towns such as Millicent, Tantanoola, Tarpeena, Nangwarry and Kalangadoo are all heavily reliant on one industry, the timber industry. These towns should be treated with caution as they are dependent on local employment.

Overall, we are expecting this year to be quite similar to 2015 with no major fluctuations in the local market.

Please note that information in this publication is subject to change without notice. Smartline assumes no responsibility for any errors, omissions or mistakes in this document. © Smartline Home Loans P/L 1999 – 2016. Australian Credit Licence Number 385325

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DISCLAIMER: The information contained in this article is correct at the time of publishing and is subject to change. It is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, Smartline recommends that you consider whether it is appropriate for your circumstances. Smartline recommends that you seek independent legal, financial, and taxation advice before acting on any information in this article.