Property investors spooked by the latest figures from the Australian Bureau of Statistics might join the increasing number opting to park their money in Adelaide ahead of Sydney or Melbourne.
Sydney’s 10.3 per cent house prices growth and Melbourne’s rise of 10.8 per cent between the December quarters of 2015 and 2016 has some worried over the possibility of a bubble.
But Adelaide’s steady growth of 4.1 per cent for the same period offers a conservative alternative for investors who barrack for the slow and steady tortoise ahead of the hare, and for those who are giving up on the dream of home ownership in Sydney or Melbourne.
Adelaide’s median house price of $501,166 against Sydney’s median of $1,123,991 and Melbourne’s, which is nudging $800,000, is positively enticing.
There is no question of value for Barbara Harris. Together with her husband Stephen Kinloch, Harris gave up on their life in Sydney’s upper north shore Wahroonga and opted for Adelaide.
“I’ve just bought a magnificent house built in the 1800s with everything from a butlers’ pantry to mod cons and original features for about half the price of our Wahroonga home,” says Harris “And, we’re just seven minutes from the city.”
Harris and Kinloch, both in their early 50s, relocated with the youngest of their three children, Madeleine, 13 and couldn’t be happier. “We’re an ex-defence family and have moved eight times in 16 years so we know property, but this is it.”
Harris reports life is so much easier in Adelaide. There are no traffic snarls to deal with, the schooling is excellent and the beaches, city, hills and vineyards are all within easy reach. “Sometimes I have lunch in the Barossa – it’s only a 40-minute drive away!” laughs Harris.
Harris and Kinloch researched the market for six months and found it is moving, but not as quickly as Sydney’s. “The value will hold here,” says Harris.
Adelaide’s annual median house price growth has enjoyed a steady average of 4.32 per cent over the past 10 years according to Domain Group data. Chief economist Andrew Wilson says the Adelaide property market is remarkably resilient. “And it’s highly affordable compared to Sydney and Melbourne,” says Wilson. “There’s not a boom, not a bust – prices just keep on keeping on.”
That resilience is an attraction for risk-averse investors.
Sally Cameron of Toop & Toop Real Estate is seeing a lot of investors buying Adelaide property for their superannuation funds. “They’re moved off buying in Sydney, Melbourne and Brisbane because those markets are just too expensive,” says Cameron.
Another set of buyers is the expats living on the eastern seaboard and internationally who are moving back from Singapore and Hong Kong. They are after the blue-chip and inner-city suburbs. Their interest is based on affordability compared to the eastern seaboard prices. “The majority of these buyers have lived here before – they know Adelaide and all it has to offer,” says Cameron.
The city was ranked the fifth most liveable city by The Economist’s intelligence unit’s 2016 study where Melbourne ranked first and Sydney was a no-show in the top ten. Ratings were based on infrastructure, environment, health care, educational resources and safety where Sydney fell down with a suggested threat of terrorism.
Patrick Robinson, the senior advisor for investment growth and international relations with the City of Adelaide council says his research shows lots of people are looking at Adelaide as an affordable, liveable and vibrant place to live.
“We are, by any measure, one of the most liveable cities on the planet,” he says. “South Australians who have moved overseas or interstate are looking at returning because of this.” He believes the small bars, laneways, festivals, food and music scene are all factors in attracting those former residents who chased careers in Melbourne, Sydney and abroad, back to Adelaide.
“Others are increasingly realising Adelaide is a great place to live and significantly more affordable than property on the east coast,” says Robinson. “The lifestyle is easier too. It’s easier to get around.”
Darryl Gobbett, chief economist and financial advisor for Baillieu Holst says another attraction for investors is the land size. “Investors coming from interstate appreciate the land size of our properties which means many of the properties can be redeveloped,” he says.
“There’s also an acceleration of new apartment blocks going up in the Square Mile,” says Gobbett. “They’re about a half or a third the price you’d pay in Sydney and at most a couple of hundred metres from the centre of the city.”
Sean Bennett of Mayo Real Estate had been dealing with investment companies buying property on behalf of their clients, but now he’s noticing a shift towards individual investors as well. “We’ve had huge inquiry from Melbourne and Sydney buyers over the past two years,” he reports.
“They’re just seeing the value for money Adelaide has to offer. They see what $700,000 to $800,000 can buy you right next to the city of Adelaide.” “They’d most certainly be earning more money in Sydney or Melbourne and they already know how good the value of property is here.”
Bennett says Adelaide’s eastern suburbs show the highest yield and growth. “That’s where everyone strives to live: Kent Town, Norwood, Parkside and Unley. They’re buying them sight unseen.” The properties rent well because they’re in blue chip areas with strong rental demand.
For those outpriced of ever buying a home in Sydney or Melbourne, Adelaide could hold the answer. Thanks to relative housing affordability South Australia has more than double the rate of first home buyers at 9 per cent than Sydney’s rate of just 4.2 per cent according to Domain Group Data. “You can still buy well under $300,000 north of the city,” says Wilson.
It seems the only downside to living in Adelaide is the job market. Daniel Gannon, SA executive director of the Property Council says South Australia is the least competitive state in the jobs market.
“It does lead the country in trend terms for unemployment with the most recent figures showing 6.6 per cent unemployment,” says Gannon.
He adds that another of the big concerns for investors looking at South Australia is its unreliable energy system and high power prices, which represent a significant impost to investors. “We have to fix that in order for investors to truly appreciate the opportunities this state offers,” says Gannon.
However, he notes there are many reasons why investors should look to South Australia including competitive advantages like the absence of a foreign investment tax for businesses and the affordability of property.
Wilson says despite the South Australian jobs market, Adelaide remains attractive. “For investors, Adelaide represents almost irresistible value.”
And for newcomers like Barbara Harris, it’s been the right move. “Our mortgage in Sydney was eating us alive,” she says. “Adelaide is easy and we don’t miss anything. Adele came, Springsteen came, and so did Robbie Williams. Plus, we have the best food in Australia.”