The month in review: Adelaide
By Herron Todd White
We do not keep statistics regarding the number of investors buying and selling in the market however investors are considered to be moderately active.
The typical demographic of an investor is hard to qualify. In Adelaide there is a mix of local, interstate and overseas investors. Interstate investors are more likely to be buying on the back of investment seminars with investment groups. Overseas investors from what we have seen are more likely to be involved in purchasing off the plan apartments in multi-storey developments in the CBD.
Investors have generally purchased units as they are considered affordable and easier to manage. They are more likely to purchase in new developments along with smaller properties which are infill developments in established locations close to existing infrastructure and finally they purchase detached dwellings or have constructed dwellings in mortgage belt locations to the north and south of Adelaide.
When it comes to detached housing investors need to work out whether they want capital growth or rental returns. In general they have sought new or near new properties in outer areas where there is good rental income and there may also be depreciation benefits. Inner ring investors are more likely to be more cashed up and rental income is not the driver for the investment decision. They are looking at a longer term for the investment and therefore capital growth.
When looking at price points we have looked at inner, middle and outer suburbs in both the northern and southern suburbs to make comparison. Outer suburbs such as Munno Para and Seaford Meadows are expanding and there has been a lot of new residential development occurring in the past few years. New or near new properties in Munno Para can cost investors between $250,000 and $300,000, whereas the equivalent property in Seaford Meadows can range from $400,000 to $450,000. Seaford Meadows typically fetches higher prices due to its proximity to the beach and the rail line which commutes residents to and from the CBD. We have compared markets based on standard 3-bedroom, 2-bathroom homes with one or two car spaces for our comparisons.
Middle suburbs such as Mawson Lakes and Ascot Park are areas which have also had vast development occur in recent years. A newly built standard 3-bedroom, 2-bathroom home of similar style can be purchased for $400,000 to $450,000 in these suburbs. These two suburbs have been very popular with investors, particulary Ascot Park where rezoning has meant that older trust homes have been purchased and demolished to make way for brand new medium density developments.
Higher price points are evident in inner suburbs such as Prospect to Adelaide’s north, and Parkside to the south. In demand character homes are found in these localities, and we have seen an increase in price paid by investors wanting to own a piece of these niche markets. Recent sales for character dwellings in these areas range from $800,000 to in excess of $1 million.
The gross yields differ when comparing properties in the inner, middle and outer suburbs. Investors are achieving gross yields of around 4.5% to 6% per annum in Seaford Meadows and Munno Para respectively. Munno Para is achieving a higher yield as the price paid for detached dwellings is lower than those at Seaford Meadows, but investors are achieving similar rent prices for newly built homes. Typical rent for a 3-bedroom, 2-bathroom home in these localities ranges from between $300 to $400 per week.
Middle localities are achieving similar gross yields of around 4.7% to 5.2% per annum. Mawson Lakes and Ascot Park are offering investors the chance to rent properties for upwards of $400 per week, which has been very popular amongst young families and students who wish to live near the CBD but not pay premium rent prices. Yields in inner suburbs are lower than outer and middle suburbs as investors who purchase these properties are more interested in the future growth in value rather than rental returns. Homes in Prospect and Parkside typically yield between 3.5% to 4% per annum.
Townhouses and Units are achieving similar yields in areas such as Mawson Lakes where the purchase of a 3-bedroom, 2-bathroom unit can achieve you a yield of around 5.2%. This figure was reached using sales of between $260,000 and $340,000 with rents ranging from $300 to $400 per week. The trend is similar in inner suburbs such as Parkside where units can fetch you a yield of around 3.8% per annum. This is when comparing rent prices of around $380 per week for 3-bedroom, 1-bathroom units with a value of $520,000.