South Australia Market Update

Quarter 2, 2023

Market Overview

It is the start of the new financial year and the end of Quarter 2, 2023 and the national housing market is on its fourth month of recovery, however, the pace of growth has slowed. 

We have now experienced 12 interest rate rises as the RBA continues to grapple with high inflation. Whilst there has been some easing in inflation, at 6.3% we are still far from the targeted 2 to 3%.  

Despite rising interest rates, the housing market has defied expectations and remained resilient. However, there is no denying this is largely attributed to low supply which continues to be outpaced by demand and is placing upward pressure on housing values. 

If we look a little closer to home, Adelaide ended the quarter with a 2.1% growth in dwelling values. A small, but substantial turnaround from the –1.1% drop in dwelling values in Quarter 1. Historically, Adelaide tends to trail the eastern capital cities’ responses to market changes, and if we are already in recovery, we are well-placed to continue achieving growth. In fact, according to CoreLogic our home values are only -0.3% below record highs and likely to reach a new high point in July. 

Source: CoreLogic Index Results 30 June, 2023

Why is Adelaide performing so well? 

There are several contributing factors to Adelaide’s high performance in the current market and 8 of the leading reasons are below:

1. Affordability – At $663,136 (CoreLogic, June), Adelaide has one of the most affordable median dwelling values of the major capital cities. In fact, the average property purchase price for our investor clients for 2023 is $592,188, with the lowest being $395,000.
2. Strong Capital Growth – There are always markets within markets and there are suburbs or property types that are still achieving strong capital growth. Below are 10 examples of suburbs where house prices have performed phenomenally over the last 12 months. These suburbs are spread out over Adelaide and have a median house price from $561,000 to $1,350,000.
   

   Suburb	Median House Price	12 Month Growth
   Henley Beach	$1,350,000	9.05%
   Stirling	$1,217,500	9.09%
   Norwood	$1,380,000	13.44%
   Torrensville	$926,000	13.62%
   Seaton	$740,000	13.85%
   Edwardstown	$758,000	16.28%
   Prospect	$1,050,000	18.64%
   Munno Para	$385,00	19.57%
   O’Halloran	$640,000	23.08%
   Aldinga Beach	$561,000	25.28%

   Table Source – YIP Suburb Reports July 2023

3.  Low Supply Levels – Nationally new capital city listings are down. According to CoreLogic in June new listings were down nearly 10% from the previous five-year average and total inventory levels are more than a quarter below average. In Adelaide, many property owners are sitting tight, especially anyone seeking to upsize or upgrade their home as rising interest rates are making this a more expensive undertaking. In addition, investors are enjoying low vacancy rates and high rental yields and are in no hurry to sell. Low supply is also a good sign that there are not significant numbers of distressed borrowers in Adelaide.
4. Low Vacancy Rates – Australia is in the midst of a rental crisis and nowhere is that more evident than in South Australia. According to CoreLogic, vacancy rates across the combined capitals has risen from 1.0% earlier this year to 1.1%, but this is still well below the decade average of 2.8%. Adelaide is recording the lowest vacancy rate across the capital cities at 0.4%, and it is a very tough time for prospective tenants to find properties.
5. High Rental Yields –According to SQM Research weekly rents in Adelaide have increased by 11.46% in the last 12 months. The average rental yield in Adelaide is 5.2% for units and 3.9% for houses and we achieving 4.85% rental yield for our investor clients buying houses in 2023. High rental yields have the advantage of reducing monthly outgoings for investors and safeguarding them from the impact of interest rate rises.
6. Cash-Rich Buyers – Interstate buyers are still investing heavily in the local Adelaide market, whether they are relocating or investing in our strong but well-priced market. Any relocators that have sold property in the more expensive Sydney or Melbourne market are able to bid aggressively and place high offers which is driving prices up for desirable properties.
7. Properties for every budget – Adelaide and its surrounding suburbs offer genuine opportunities for buyers in most budget ranges. Whether your budget is $400,000 to $3 million (or more!) there is the perfect property for you. The Adelaide market is bigger than people give it credit for, in the last year and a half we have purchased properties in over 70 different suburbs.
8. Unbeatable Lifestyle – Adelaide’s reputation as a lifestyle destination is growing rapidly. Whether you want to live near the sea, the hills, or the city there are lifestyle options for everyone. In 2021, Adelaide was named the third most liveable city in the world in the Global Liveability Index, in 2022 we slipped down the rankings a little but in 2023 we have rebounded to position 12 with a score of 95.9% compared to Australia’s top-rated city with a score of 97.7%.

What’s the outlook for 2023? 

The Reserve Bank has given mortgage holders a reprieve from interest rate rises, holding the official cash rate steady at its July meeting. It is expected that there may be more rate rises in the future, but most economists and experts believe we are nearing the top end for 2023. This is giving some buyers comfort around being able to accurately calculate the cost of buying a property for the short to medium term and for investors to understand the holding cost of buying a property.  

We expect demand to continue to outpace supply for the remainder of winter, and it will be interesting to see if there is an uptick in new stock in Spring, as typically is the case. We are still seeing large numbers of off-markets come across our desk every day and we expect this trend to continue as vendors test the waters by trying to sell off-market before committing to a listing.  

We expect our rental market to remain very tight for 2023. It is already under significant pressure and overseas migration is ramping up and new arrivals typically rent rather than purchase initially.  

With local and interstate demand high we expect to see Adelaide riding out this economic storm in a strong and secure position.  

Suburb to Watch

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