Adelaide has a two-speed residential market: HTW
Many have mixed feelings about the 2018 outlook for the South Australian property market, the latest report by valuers Herron Todd White (HTW) noted.
An increase in the median price appears to be underpinned by the inner ring whilst the outer suburbs maintain slow growth and in some instances negative growth.
HTW are paying close attention to the labour market, foreign investment and interest rates as these appear to be the issues which will have the biggest bearing on the South Australian property market in 2018.
Over the past decade, the South Australian jobs market has undergone significant changes with a move away from traditional manufacturing based industries.
This has included a number of well publicised closures, in particular the Holden manufacturing plant in the northern suburb of Elizabeth, the announcement by Tenneco that jobs will be lost at the Monroe shock absorber plant in the southern suburb of O’Sullivan Beach and an announcement by Coca-Cola Amatil that their Thebarton bottling plant will be closing in 2019.
Consequently, the South Australian unemployment rate has risen to the second highest in the nation at 6% as at January 2018 (source: Australian Bureau of Statistics).
This has affected populations in the middle to the outer ring, particularly the northern, southern and western suburbs which have the largest proportion of those employed in the manufacturing industry.
Within these regions, Seaton to the west, Morphett Vale to the south and the greater area of Elizabeth to the north provide a good snapshot of general market parameters given their large volume of annual turnover.
Seaton is a large western suburb located approximately 11 kilometres from the Adelaide CBD.
The suburb comprises a north and south section with Royal Adelaide Golf Club situated in the centre of the suburb. Data from the December 2017 quarter indicates the median dwelling price to be $505,000 (source: Real Estate Institute of South Australia (REISA)) which is a 3.8% increase from the same period in 2016.
The majority of dwelling transactions during 2017 occurred within the $400,000 to $600,000 price range (source: CoreLogic).
The recent sale of 10 Raymond Avenue, Seaton for $510,000 provides an indication of what can be purchased within this bracket.
This is a circa 1960s, 3-bedroom, 1-bathroom dwelling situated on an allotment of 757 square metres (pictured below).
It was sold by Attilio Cavuoto and Michael Cavuoto from Ray White.
Located at 10 Raymond Avenue, the property has been partially updated internally and features a large pergola, carport and vinyl in-ground pool.
It is within easy reach of many amenities that include Westfield West Lakes, schools, transport (bus & train) and local various shops.
Seaton provides greater affordability than the similarly located suburbs of Fulham, Fulham Gardens and Kidman Park.
Morphett Vale is located approximately 26 kilometres south of the Adelaide CBD.
Development consists of mainly 1970s housing with further development occurring during the 1990s.
Morphett Vale has shown gradual year on year price growth since 2013. In 2017, there were 440 dwelling transactions in Morphett Vale. With the current median house price being $312,500 (source: REISA), Morphett Vale had a 1.54% increase in the median house price from the December 2016 quarter to the December 2017 quarter (source: REISA).
Having such a high turnover of sales provides a reliable indicator as to how the general market is faring in the middle and outer southern suburbs.
Dwelling values within the northern suburbs, particularly those surrounding Elizabeth Central, approximately 28 kilometres north of the Adelaide CBD, have historically fluctuated.
It’s noted that Elizabeth East, Elizabeth Park, Elizabeth Grove, Elizabeth South and Elizabeth Vale have all recorded reductions in their median house prices in the past 12 months. Rental yields remain strong in these areas with gross yields hovering around 6% to 7%.
An example of this is 38 Ballard Street, Elizabeth East which settled in December 2017 for $181,000 (pictured below).
This property is now let for $275 per week indicating gross yield of 7.1%.
Positioned on an 801 sqm block, it comes with three bedrooms with built in robes, updated kitchen, spacious lounge and garden sheds.
The middle to the outer ring has historically had a higher number of first home buyers and investors who are typically mortgage holders.
At the March meeting of the Reserve Bank of Australia, the cash rate was left at a continued record low of 1.5%.
There has been continual speculation as to when the cash rate will be lifted, with some lenders taking their own measures through 2017 and lifting their lending rates. Media coverage of doom and gloom scenarios surrounding interest rate rises has put this issue in the forefront of mortgage holders’ minds, the recent HTW report noted.
If this scenario was to play out, the middle to the outer ring could be the first market segment to show signs of stress.
Despite these market pressures, Adelaide’s median house price reached a record high of $465,000 in the December 2017 quarter.
Agents have indicated that there has been significant interest in the inner ring from local, interstate and overseas purchasers.
The $500,000 to $1 million price bracket is considered to have had the most upwards pressure through the back end of 2017 and into early 2018.
Comparatively to the surrounding suburbs, good buying can be found in Linden Park which is located approximately six kilometres south-east of the Adelaide CBD where the median house price currently sits at $989,444.
This suburb is characterised by early to mid-1900s dwellings on allotments of 600 square metres plus with a mixture of more recent infill development.
The surrounding suburbs of Tusmore, Toorak Gardens and Beaumont have similar characteristics and have median prices at December 2017 of $1.32 million, $1.507 million and $1.012 million respectively.
The CBD apartment market has shown significant growth over the past 12 months, rising from a median of $434,000 in January 2017 to $505,150
in December 2017.
Data supplied by Core Logic indicates that 2017 had the largest number of CBD apartment transactions on record with 646 transactions.
HTW noted that a large proportion of these transactions have come from off the plan sales contracted throughout 2014 to 2016 which have now settled on completion of construction. There has been a significant amount of foreign investment in this market.
The CBD apartment market will be monitored as the government enforces increased regulations on foreign investment.
