South Australia Market Update

Quarter 4, 2023

Market Overview

2023 the year that no-one predicted. After 13 interest rate rises the national property market value continued to rise. Nationally, the market ended the year 8.1% higher than where we started, and Adelaide ended the year 8.8% higher than where it started.

Housing values in Adelaide are at record highs whilst we continue to experience remarkably low levels of supply in conjunction with above-average buyer demand.

These conditions have made it a tough year for purchasers and many interested buyers have had to widen their “wish list” for homes or investment properties just to have some options to choose from.  

The market remained active right up to Christmas with some properties reporting having over 100 groups inspecting during December weekends. And we completed our last purchase of the year on the 24th of December for one lucky home buyer. 

We continued to see strong demand in the sub $1 million price point throughout the year but noted a slight dip in demand in the higher price points. A lot of different buyer types collide in the sub $1 million market, and with low supply this creates competition between the different buyers.  

Why does Adelaide continue to outperform other capital cities? 

There are several contributing factors to Adelaide’s high performance in the current market and 7 of the leading reasons are below:

1. Affordability – It is hard to believe that at the end of 2019, before COVID and before the cost-of-living rises the median dwelling value in Adelaide was around $440,000 and now at the end of 2023 Adelaide’s median dwelling value is $691,591. And this still makes us more affordable compared to most of our sister capital cities including Sydney, Canberra, Melbourne, and Brisbane. We have become somewhat of a mecca for interstate investors who are priced out of their own local markets and see value in our great city.  Our average investment purchase price for our clients in 2023 was $628,888. 
2. Low Supply Levels – Now it cannot be denied that one of the key reasons for price growth in the market, is low supply. Tim Lawless from CoreLogic reported “ advertised supply levels have remained persistently and substantially below average.” in Adelaide. There was an uptick of new supply leading in the Spring season, but demand for quality homes and A-grade investment properties continued to outpace supply. 
3. Low Vacancy Rates- In every report this year we have said Australia is in the midst of a rental crisis. Unfortunately, there is no quick fix, limited new housing supply, plus population growth has sent many state governments scrambling to produce solutions to combat the issue. Throughout the year Adelaide had the lowest or second lowest vacancy rates across the capital cities. According to SQM Research our current vacancy rate is 0.5%, however somewhere between 2 and 3% is a sustainable rental market. Whilst low vacancy rates make it a tough time for tenants, it cannot be denied that it is benefitting investors.  
4. High Rental Yields – The knock-on effect of low vacancy rates is that weekly rents have been on the rise. According to SQM Research Adelaide weekly rents have increased by 15.3% in the last 12 months! Adelaide investors are enjoying above average rental yields. Our average rental yield achieved for our clients is 4.7% with many enjoying over 5% and we typically only buy houses for our investor clients. This is in comparison to SQM Research’s reported average rental yield for houses at 3.8%.  These high rental yields have the advantage of reducing monthly outgoings for investors and safeguarding them from the impact of interest rate rises.  
5. Properties for every budget – Adelaide and its surrounding suburbs offer genuine opportunities for buyers in most budget ranges. The market is bigger than people give it credit for, in the last 18 months we have purchased properties in 95 different suburbs. During 2023 we bought investment properties for our clients ranging from $394,000 to $1,360,000 and for homeowners from $367,000 to $3,025,000! So, whether your budget is small or large there is the perfect property for you in Adelaide. 
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 more expensive capital cities are able to bid aggressively and place high offers which is driving prices up for desirable properties. 
7. 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. Pristine white beaches and world-class wineries can be reached by car in as little as twenty minutes from the city and we are a city known for its festivals, love of sport and world-class food and wine.  

What’s the outlook for 2024? 

It is widely predicted that interest rates have neared their peak, with cuts predicted to start in late 2024. 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. However, some people are starting to feel the pinch of cost-of-living increases and are tightening their belts.  

In some cities, less so in Adelaide, there has been a softening across price growth even though most cities continue to show growth. 

We expect demand to continue to outpace supply for all of 2024, if not at least the first 6 months and for that to continue to deliver growth to our city as there are still a healthy number of prospective purchasers looking to get into the market. We think family-friendly homes on largish blocks of land and townhouses in metropolitan areas to continue to perform well, especially if minimal renovations are required. Agents are indicating that they are seeing strong appraisal and listing numbers, earlier than usual so far this month where the market is usually quiet until after Australia Day.  

The rental market will remain tight, with projected positive population growth in 2024 contributing to demand. There is speculation that the rapid growth in rents will slow due to the rising cost of living which means tenants cannot simply not afford to pay more.  

We cannot wait to help all our clients, new and old, and are expecting to secure some amazing buys for them. 

Suburb to Watch