The Smartline Report – September Edition

The month in review: Adelaide

By Herron Todd White
September 2015

With many homebuyers being priced out of the established residential areas the options are to move to more affordable areas or to buy a smaller dwellings in an area that is undergoing redevelopment. There is also the appeal of smaller living units being simpler to manage and suiting the modern lifestyle of younger people. Local councils are starting to encourage more and more medium density development and this will tend to mean that attached housing will replace the typical older house on a ‘quarter acre block’. It is also evident that in the outer suburbs subdivision projects tend to maximise potential by including allowances for attached housing. Areas that are probably most suited to attached housing are the middle ring suburbs that have houses that were built duing the 1950s to 1970s but are now in need of either refurbishment or redevelopment. The tendency is to now look to fitting two or three dwellings on a site that formerlly accommodated a single residence. Competition for these sites is fierce and that benefits the end buyer as developers are working to thin margins resulting in end value price points being kept reasonable.

In particular there are large parts of Campbelltown have been rezoned for medium density housing and areas such as the inner western suburbs including Seaton, Brompton and Bowden, and suburbs surrounding the airport are all undergoing urban renewal to some degree.

Price points are variable and are dependent on the scale of the development. In some higher density developments land components are very small and prices will be in the order of $250,000 to $350,000. Where as the more traditional two or three dwelling development will result in an end value of an attached dwelling being from $300,000 to $600,000.

We recommend some caution to investors looking to buy lower priced product in the outer suburbs and in particular the outer northern suburbs given the short to medium term prospects of unemployment in the north. There is potential for stagnation or contraction of demand in those areas which might mean declining prices in real terms. These areas need close monitoring over the next two years.

Design change have tended towards smaller developments and in the inner city accommodation of less than 80 square metres is not uncommon. Smaller units in the city may be being bought by investors and there are some signs that there is an oversupply of new product. This may have an effect on the secondary markets.

A word of caution from a funding perspective in regard to multiple dwelling developments. There are limitations resulting from the Australian Banking and Finance Industry Standards in regard to co dependence of dwellings and this has resulted in complexity in obtaining finance prior to contruction. Our market in general remains steady with limited growth for both houses and units. Corelogic RP Data Research is the most relaible source for general data on sales and rentals and recent statistics indicate that Adelaide dwelling values have risen at a rate of 3.4% over the past 12 months with the five year rate being low at 0.6% . The unit value change over the past 12 months has been 3.4% with the five year change being negative at -0.4%. There is a rental growth rate of less than 1% in both houses and units. However in some districts demand is patchy and caution should be exercised in decision making. Our market is showing limited capital growth stemming from low confidence levels. This is off set to a degree by the current and continued low interest rate environment.


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 – 2015. Australian Credit Licence Number 385325


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