Keep your eye on South Australia, because this quiet achiever is about to explode. While its neighbour to the west has been showered with attention due to a resources-fuelled property boom, South Australia has been chugging away in the background, quietly consolidating its position as the next investment powerhouse.
Andrew Donnelly, CEO of Braxton Chase, says, “The three ‘R’s of property success continue to make their presence known in Adelaide – resources, resources and resources.”
Donnelly claims that “the wide scope of exploration expenditure across [SA] – which has increased by 70% over the past year – is now second only to Western Australia”.
So it’s not just the WA real estate market that is benefiting from the boom. In fact WA prices have started to falter as investors begin soberly to reassess the true value of property in that state. Meanwhile the spike in SA prices, particularly in Adelaide, is only just getting started.
According to Residex, Adelaide house prices jumped 20.20% in the 12 months to January 2008 and 5.55% in the three months to January. The average rental price for a house is just $295 – the lowest of any capital city – and the median yield of 4.25% is lower than Darwin, Canberra and Hobart but higher than the larger cities.
Adelaide units have fared even better in price, soaring 22.31% year on year and 6.87% in the three months to January. Even with such rapid growth, the average price of a unit in Adelaide – $275,500 – is lower than that of every other capital city except Hobart, so there is certainly more room for growth. Units in Adelaide yield 4.73% on average.
Louis Kanellos, director of property development and consulting firm Chasecrown, says that prices around the city are skyrocketing primarily due to a lack of supply. He points out that a number of Adelaide councils actively oppose the subdivision of existing allotments.
“There’s obviously more demand and there’s no supply so that’s what’s fuelling the increase in prices,” he says. “We did a project in Norwood – we built 12 new dwellings there. We’re approaching completion and we’ve had 10 of the 12 dwellings sell off the plan.”
This demonstrates that pent-up demand is at historically high levels, says Kanellos. “Adelaide is not traditionally an off-the-plan buying market,” he says. “They’re a little bit more cautious, so it shows you that when you are introducing good new product to the market, there are people there to buy.”
