Property Market Insights Q3 2020
Quarter 3, 2020
Recently, I wrote an article for the “Australian Property Investor Magazine” about why now is the time to invest in Adelaide and it is a statement I firmly stand behind, even in the middle of a global pandemic!
Adelaide’s property market continues to achieve steady year on year growth. Our cheaper price point (median house price of $450,000) and much higher rental yields (4.5 to 5 per cent) compared to our Eastern sister states is attractive to overseas and interstate investors. They find their cash flow is less affected which is an important consideration in an uncertain jobs market.
South Australia has benefited in Quarter 3 from having low numbers of Coronavirus cases and that meant life and the economy were able to return to a more normal way of life. In Quarter 2 public inspections and public auctions were banned and the REISA president, Mr Roenfeldt, said sales had dropped by about 50 per cent since COVID-19 was declared a pandemic. In Quarter 3 there were minimal restrictions in real estate, public opens and auctions were back on. Interested parties needed to queue outside to inspect properties, at whilst this may have required a little extra time at least prospective buyers or tenants could get that all in important physical inspection.
Whilst we have definitely seen an increase in hand sanitiser at inspections what we didn’t see is the availability of stock increase. Personally, I would estimate stock levels were down about 60 per cent compared to Q3 last year. Coming into Spring we usually get email after email of new listings, but right now it is slim pickings. Vendors who are still unsure of the market or their circumstances are not listing or are attempting to sell ‘off-market’. Off-market is attractive to vendors as there is less upfront or committed cost and they feel they only have to sell if they get the price they want. On the flip side though it is hard for selling agents to drive prices up if there is little or no competition for the property as only a small pool of people become aware of it.
The difficulty for those looking to buy in Adelaide is strong competition for limited stock, especially in the below $500,000 price bracket, which is popular with investors, first home buyers and young families. COVID-19 has created a sellers’ market in Adelaide, and it is easy for buyers to pay too much or purchase something that is not ideal.
In late September we saw a welcome upswing in the number of new listings. On Saturday, September 25th I had 12 properties lined up for inspection, earlier in the month it felt like it would have been difficult just to find 12 listings!
As South Australia has been able to fast track its lifting of COVID-19 restrictions, including the recent announcement that SA will open its borders to NSW we hope that many sectors of our economy will continue picking up, including tourism.
The head of research at CoreLogic, Tim Lawless commenting that the “performance of housing markets are intrinsically linked with the extent of social distancing policies and border closures which also have a direct effect on labour market conditions and sentiment.
Government support packages like Jobkeeper and Jobseeker are being rolled back nationally with recipients receiving lower repayments from the end of September. Unfortunately, this coincides with the first round of borrower repayment holidays expiring. However, the good news is banks typically do not like selling distressed properties, they want to work with their customers and find ways they can meet their loan repayments. The government support packages, albeit at a lower rate, are in place to the end of March and this will provide more time for the South Australian economy to return to normal.
We believe Adelaide’s steady market will hold. Listings will slowly increase as consumer confidence returns. However, it will probably be sometime before they return to pre-COVID numbers. My advice is if you are looking to invest or buy a home in Adelaide be patient. Be ready, have your finance in order and watch the market closely but try not to overpay due to FOMO!
Suburb to watch
Colonel Light Gardens - "The heritage suburb"
Colonel Light Gardens is a suburb with a fascinating backstory and a safe future.
The suburb is located approximately 7 km south of the Adelaide city centre. The small 1.58 km2 suburb is known for its wide, tree-lined streets with charming 1920s bungalow homes stretching down their lengths. Colonel Light Gardens is regarded as one of the finest examples of the Gardens City town planning movement and was designated as a State Heritage Area in May 2000. The designation recognises the important historical and cultural significance of this suburb.
This family-friendly suburb continues to grow in popularity. The combination of open spaces, long-established vegetation, wide footpaths, service lanes, meandering streets and internal reserves make this a quiet and private residential suburb. It includes a small shopping centre with plenty of playgrounds, schooling options, childcare, medical suites and an easy commute to the CBD. We love this suburb and all that it has to offer.
Colonel Light Gardens is a popular suburb for homemakers, professional couples and families and once inside you would never know the city is only 20 minutes away.
There are is a small assortment of shops and facilities in the suburb but there are many options nearby. The upmarket shopping complex in Mitcham has 55 retail and food outlets and a seven-screen cinema. Or for an extra 10 minutes in the car, you can reach the sprawling Marion Westfield the largest shopping complex in Adelaide.
The main primary school, Colonel Light Gardens is a heritage-listed building and was established in 1926. There is also a catholic co-ed primary school, St Therese in this suburb’s tiny borders. There are some good secondary college options in nearby suburbs and the suburb is even known to attract university students due to its proximity to Flinders University.
The suburb is well located for a quick drive to the city, beach or hills. The suburb is served by Adelaide Metro buses.
The suburb is great to explore with many paved and unpaved laneways, alleyways and bike tracks. It has a multitude of historic parks and gardens. Mortlock Park is home to the local football club or you could join the CLG Bowling club.
Most of the houses in CLG were built in the 1920s under the Labor Government’s Thousand Homes Scheme. This program allowed hundreds of families to move out of crowded, sub-standard inner-city accommodation into their own, more spacious homes in metropolitan Adelaide.
Due to its heritage significance blocks cannot be divided, so there will not be blocks of units and out of character development going up.
Median house prices saw a 15.79% growth over the past year. Renovated and restored bungalows are great for buyers with a larger budget or presentable but original homes are snapped up as renovator delights.
3 Beds | 1 Baths | 1 cars | Sold $890,000 | Agent Listing
Set on a tree-lined avenue surrounded by friendly neighbours and beautiful character homes, this charming c.1926 solid brick Bungalow has been impressively enhanced for modern family living with a spacious extension that seamlessly blends period elegance and contemporary style.
This family home is within walking distance to Mortlock Park, The Local Crowd Café and CLG RSL. Enjoy the convenience of being only minutes to the cosmopolitan delights of Mitcham Square, Unley and King William Road, or a short drive into the CBD. Zoned for Colonel Light Gardens Primary School, Unley High and Springbank Secondary College, it is also within close proximity to a range of other sought-after schools.
Vacancy Rates and Median Prices
Adelaide Q3 Vacancy Rate 0.9%
What can we say, the rental market has been hot!!
According to SQM Research, Adelaide has some of the lowest vacancy rates in the country and its shows in the demand and competitiveness by tenants for quality properties.
We leased (or released) over 20% of our rent roll this last quarter with only a handful of vacant days between them all. The demand for properties of all types has been high. We have been able to achieve premium pricing for our landlords, but in no way sacrificing quality of tenant. Many quality tenants have been applying for properties and sadly missing out, this has also encouraged them to submit an offer in way of extra rent per week or large amounts of rent paid in advance. While these offers don’t automatically mean the property will be leased to these applicants, it is something that may help sway if trying to split between multiple suitable applicants.
We have had on average 30 groups through our inspections this last quarter, even as high as over 100 attendees. Limiting the number of people in a property at a time has meant that there has been a lot of patience, line ups and longer than the norm time taken for an open inspection. What this has also meant is that prospective tenants have had the opportunity to have a good look through the home and then we have the opportunity to speak with them to get to know them and answer any questions they may have.
So many of our properties are bought as 100% investment properties. Our landlords are reasonable, they know the true worth of their property, but also the worth of the right tenant. Tenants looking for long term prospects are also drawn to these properties as they feel more comfortable knowing that they are purely an investment and not likely to be available for only 12 months.
With the number of tenants looking, combined to moving into historically a busier time of year we do not see the rental market slowing down.
Triple Investment Purchase by Interstate Buyer
Our client, previous residents of Adelaide who were living overseas approached us with a budget of nearly $1.4 million and wanted to buy property in Adelaide that were low-maintenance and would achieve a strong rental return and capital growth.
It’s a tall order to achieve strong rental yield and capital growth but Adelaide properties are uniquely placed to achieve this. We secured three properties for our client for a total of $1,345,000. These properties totalled 1800 sqm of land and achieved an average rental yield of 4.9%. Each property was in a different suburb with a different appeal and of a different style to diversify their investment portfolio.
As part of our full service not only did, we search, assess and negotiate for these properties we organised Building and Pest Inspections when required and recommended a reputable conveyancer.
Client Type: Overseas Investors
Service: Search > Assess > Negotiate
Total Budget: $1.4 million
Location: 15kms NW of CBD
Purchase Price: $520,000
Property: Family Home built in 2016
Land Size: 354 sqm (approx)
Weekly Rental: $485 per week
Rental Yield: 4.85%
The first cab off the rank. This property caught our eye because Peterhead is the often forgotten suburb located next to seaside suburbs Semaphore and Largs Bay. The family home built in 2016 is set on a low maintenance block of 354sqm and is a short distance to the beach, public transport, shops and schools. The property was listed for private sale and we had an excellent working relationship with the selling agent. This relationship ensured we had the upper hand during negotiations as we were able to meet all the vendors preferred conditions and fight off other interested parties.
We commenced the rental listing a few days out from settlement at an asking price of $475pw. We collected the keys on the day of settlement and the home was shown within a few hours! We ended up with multiple quality applications and a result above expectations of $485.⠀
Suburb: Valley View
Location: 12kms NE of CBD
Purchase Price: $425,000
Property: 3 bedroom family home
Land Size: 780 sqm (approx)
Assessed Weekly Rental: $380-$410 per week
Rental Yield: 4.65%
This is the second property in the portfolio purchased for our overseas client. Valley View is predominantly owner-occupied suburb that has been achieving strong growth in recent years. This particular property was nestled in a low traffic street area amongst other quality homes. The “wow” factor was the deck and yard that provides gorgeous views of the Adelaide Hills.
Once again, this home is situated in an area with high growth potential and strong rental interest. We don’t only look at the facts and figures when viewing properties for investors, but we also look at whether they would appeal to tenants and the target market of tenants. ⠀
There are good local school options nearby and pretty parks and reserves for exercise or a casual stroll. The O-Bahn Busway is close by for quality public transport to the city, and the bus route on Wright Road is within walking distance. Tea Tree Plaza provides world-class shopping facilities and Ingle Farm or Valley View Shopping Centres cater for weekly grocery shopping.
Purchased under the hammer at auction, with a good attendance, our strategic and confident bidding put off FHB in attendance and we secured the property under budget for our client. The vendors of this property, were actually keen to stay on as tenants for a short period, leaving no vacancy at all for our client after settlement, and a fair and reasonable rental value for the coming months. With such a beautiful overall feel, lovely view, relaxing backyard, this home will continue to attract the type of tenants we and our clients are after!
Suburb: Hope Valley
Location: 14kms NE of CBD
Purchase Price: $400,000
Property: 3 bedroom family home
Land Size: 678 sqm (approx)
Weekly Rental: $400
Rental Yield: 5.2%
The final piece to the puzzle. Another home purchased for our overseas client, once again in a differing suburb to the previous two, but still with strong growth potential and rental yield.
This gorgeous home is near Hope Valley’s finest offerings which are easily accessed and just moments away, including a variety of schools and parks. It is 16kms from the CBD and 4kms to Westfield Tea Tree Plaza.
We love that this home is on good-sized block, that the block is flat and internally the home has been tastefully renovated. Ensuring that our client will be able to maximise their returns without having to make any changes and the land itself will generate strong growth in the future.
This property was auctioned under unusual circumstances for Adelaide, it was an online auction that went for a period of days and we were able to make electronic offers with attached terms and conditions. There were over half a dozen offers on the table and we managed to secure it with extra money left in the budget.
The Adelaide rental market is tight and we were able to capitalise on the lack of available stock. The vendor requested to lease the property back for a week allowing us to commence advertising and show the property, prior to it becoming vacant. Our new owner received multiple quality applications and could take the pick of the bunch. Between the vendor vacating and the tenants commencing, there was only one none income-earning day, we call this pretty good business!
by Katherine Skinner
Katherine Skinner began her career in property over a decade ago in Melbourne working in Buyer’s Advocacy and Property Management. Returning to her home town of Adelaide in 2009, Katherine quickly established a reputation as an exceptionally thorough and diligent practitioner, providing outstanding customer service coupled with a calm and positive attitude while working with some of Adelaide’s most highly regarded agencies. Katherine was named the REISA Buyers Agent of the Year 2018, a REIA National Awards 2019 Finalist and is the current South Australia representative for REBAA.
0438 729 631 or email Katherine
I was referred to Katherine through a friend and am so grateful I was.
We were looking to purchase an investment property in Adelaide while living interstate. We engaged National Property Buyers to consult and inspect a property we had found on our behalf. At no stage did Katherine try and sell any other services, and we felt comfortable trusting her judgement and recommendations through the process.
Her knowledge of the local Adelaide market was evident in our discussions and we would never use anyone else if we purchased in Adelaide again. Thank you Katherine!
5 Star Google Review, 2020