Adelaide June 2017

The month in review: Adelaide

By Herron Todd White
June 2017

The Adelaide housing market is made up of a variety of housing styles, with different sectors having different levels of suitability for renovation. Housing stock in the inner city that was built in the 1800s is generally well sought after if it’s need of renovation. There are many small stone fronted cottages on small holdings that appeal to younger purchasers intending to owner-occupy as a first home while enjoying the benefits of inner city living. This trend extends into the inner eastern and inner southern suburbs. Suburbs such as Norwood, Parkside and Unley provide good opportunities to buy and renovate older housing stock.

Housing stock slightly further out from the CBD, for example 3 kilometres to 8 kilometres from the city, tend to be of houses built in the mid 1900s and can be wartime or post war construction when building materials were in short supply. This has resulted in housing stock that is often borderline as to whether buyers might renovate or replace. The risk in this market is that buyers place too much value on the existing structures and over spend on renovating and maintaining a weak fundamental structure, when replacement might be a better option. This middle market is where investors tend to get involved. There is strong demand for corner sites where the rear garden is of a size that it can be divided to create a new building block, while the original house is renovated. Margins for renovators and developers in this market are tight due to competition however demand remains strong due to market strength and generally safe capital growth.

Outer suburban markets are not safe for investor renovators due to limited capital growth and uncertain demand. Recent sales statistics are showing that capital growth in value of housing stock in the outer suburbs is very slow. This tends to leave this market for owner-occupier renovators where the intent is to buy well and renovate for longer term occupancy.

Classic renovation activity is remodeling a house floorplan to provide an open plan kitchen and family room on the rear of a house that otherwise has an adequate number of rooms in the original house to provide bedrooms and wet areas. The Adelaide market is one that does not provide a high level of real uplift in value and carries some risk when the cost of construction, time to develop and statutory charges are taken into account. Astute developers can make things work towards a profit, although for the novice it doesn’t take much for potential profit to evaporate. It’s also important to get the cost and quality balanced and in line with market expectations in any area. It’s difficult to generalise, however as a rule of thumb the closer the property is to the city, and to the beach to a degree, the higher quality of renovation is advisable. Therefore, in the inner city and suburbs like Norwood, Fullarton, Parkside, Wayville and North Adelaide, it’s wise to provide high quality and well thought out renovations and generally the expense can be recouped with profit.

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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.