Adelaide June 2018

The month in review: Adelaide

By Herron Todd White
June 2018

The South Australian property market performed well over the first half of the year with stable growth occurring. State Government data from the March quarter indicated an increase in the median house price from $465,000 to $470,000 for metropolitan Adelaide from the December quarter, whilst a rise from $260,000 to $270,000 was recorded in the same period for non-metropolitan major townships.

The Liberal Party won the May state election with policies promoting the creation of jobs, lower utility costs and investment in new industries and infrastructure. The change in leadership has led to renewed optimism for the South Australian economy. A number of significant infrastructure projects continue to make the CBD more accessible from northern and southern suburbs whilst the development of the Riverbank Precinct and activation of the East End and Hindley Street precincts have continued to help create a vibrant atmosphere in the heart of the CBD. These factors along with the record low cash rate of 1.5% being maintained by the RBA at its May meeting continue to entice purchasers into the Adelaide market.

The established inner ring suburbs with proximity to the CBD continue to be the best performing. Agents are indicating that they are unable to keep up with demand as selling periods have reduced with less stock being available to offer to the market. Realestate.com has released data from the six months to 30 April indicating that dwellings within the north-eastern fringe suburbs were spending 13 days on the market, down from 35 days for the same period 12 months ago. Gilberton was indicated as the suburb with the quickest selling period whilst Hyde Park, Sefton Park, Clarence Gardens and Melrose Park are all seeing dwellings on average achieve a sale within 20 days.

The increased demand has seen an improvement in auction clearance rates. CoreLogic data from the weekend of 26 and 27 May shows Adelaide to have a clearance rate of 66.7% from the 82 auctions held. For the same period in 2017, 112 auctions were held with a clearance rate of 57.6% achieved. The improved clearance rate is being influenced by buyer demand and the limited available stock.

For investors, gross rental yields within the outer ring remain steady in the 6% to 7% range. Yields tighten to sub 4% within the inner ring. With an increase in demand for properties in the inner ring, gross rental yields are expected to tighten further.

Residential units continue to be popular with owneroccupiers and first home buyers and have a current median price of approximately $330,000. Agents have indicated that purchasers in the sub 25 age bracket are purchasing units as their first foray into the property market given the lower price point for entry. 2- and 3-bedroom units are typically in higher demand whilst agents have advised that single bedroom and bedsit units are requiring longer selling periods.

Character homes within the inner ring continue to be in the highest demand. Interest in this market has been coming from owner-occupiers and investors. Recently listed to the market is 66 Ann Street, Stepney with an undisclosed asking price.

Adelaide 1

This is a single fronted detached blue stone cottage disposed as 2-bedrooms and 1-bathroom. The dwelling is situated on an allotment of 270 square metres with two off street car parks available and has been updated internally. Stepney is located 3.8 kilometres north-east of the Adelaide CBD and is characterised by turn of the century homes in a mixture of styles. This suburb is serviced by The Avenues Shopping Centre, the ever-evolving retail and dining precinct along Magill Road and the Parade Norwood a stone’s throw to east.

Within the first three days of being offered to the market, the agent had interest from overseas and a number of interstate investors. CoreLogic indicates the current median house price in Stepney to be $900,000.

The north-western suburbs continue to provide value for money for those looking for character homes in established suburbs. The suburbs comprising the greater area of Woodville provide tree-lined streets within eight kilometres of the CBD serviced by both Port Road and Torrens Road. The city tram network has a final stop at the Adelaide Entertainment Centre which is where Port Road meets the city ring route. There have been proposals to extend this network along Port Road which would provide permanent public transport infrastructure to service Woodville and the surrounding suburbs. Under contract for $575,000 is 7 Oval Terrace, Woodville South. This is a renovated double fronted cottage disposed of as 3-bedrooms and 1-bathroom. The property has an attached double garage and is situated on an allotment of 509 square metres. CoreLogic data indicates that as at February 2018, the median house price in Woodville South was $540,000 which is a 4% increase from the same period in 2017.

Adelaide 2

There continues to be a steady supply of new homes being constructed in both metropolitan Adelaide and in proximity to larger regional centres. The metropolitan councils have softened their development constraints over the past 12 to 24 months, allowing for an increase in medium to highdensity residential development. This has seen a sharp increase in the prices being achieved for larger parent allotments with favourable zoning constraints. This is evident in the sale of 15 Richardson Avenue, Tranmere which settled in January 2018 for $842,000 after being purchased in 2012 for $520,000. This property was purchased in 2012. as a family home, only to be sold in 2018 as a development site. There is currently an application to divide this property into four allotments.

Adelaide 3

New stock, particularly townhouses, being created from the middle ring suburban development sites continues to be in demand with price levels exceeding expectations. Agents have indicated that townhouses in smaller groups with direct street frontage and limited common improvements typically see the highest levels of demand. Price levels for this style of product historically fluctuated within the $400,000s and high $500,000s range. Recent sales evidence is now indicating this value range has expanded into the mid-high $600,000s. Higher quality townhouses within the middle ring north-eastern suburb of Hectorville have been achieving prices in the mid $500,000s over the past six to twelve month period. The sale of 8 Laver Street, Hectorville achieved a price of $663,000 which broke through the ceiling of what was considered achievable for this type of product in this location. This is a circa 2018 4-bedroom, 2-bathroom high-quality semi-detached dwelling on an allotment of approximately 241 square metres.

Adelaide 4

Residential development has continued in the areas surrounding the larger suburban satellite centres of Mount Barker, 35 kilometres south-east, and Gawler, 51 kilometres north of the CBD. Land values within these locations are at a lower rate than those closer to the CBD. This provides first home buyers and investors an opportunity to enter the property market with a new product at a lower price point. Price levels for land and build packages within these locations range from $270,000 to $460,000 which has remained constant over the past 12 months.

There has been continual speculation as to the way the general property market will fare for the remainder of 2018. Recent data has shown negative growth in a number of the major Australian capitals with slowing auction clearance rates. Given the gradual growth over the past 12 to 24 months of the South Australian property market, it’s viewed that it will be shielded from any significant downturn seen on the east coast as the market comes off the boil. The South Australian property market is expected to remain stable for the remainder of 2018.

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