Are you on the hunt for the best suburbs to invest in Adelaide?
Adelaide is one of the most affordable cities in Australia and offers a relaxing lifestyle with thriving arts and culture, and food and bar scenes - it offers great liveability.
But with many investors exercising caution in the Adelaide housing market since the state’s automotive industry shut down in 2017, what's in store for Adelaide in 2019?
Adelaide has managed to dodge much of the “property market crashing” that Sydney and Melbourne have been bearing the brunt of, and with low interest rates and relatively affordable housing compared to the rest of the country’s capitals, the past five years has seen a 3.8% per annum rise in the average house price in Adelaide.
"... with low interest rates and relatively affordable housing compared to the rest of the country's capitals, the past five years has seen a 3.8% per annum rise in the average house price in Adelaide."
Read on to find out what leading property analysts and forecasters predict will happen in 2019 and beyond, and what 2018 looked like for the Adelaide real estate market.
What did the property market in Adelaide look like in 2018?
2018 saw softening in the larger markets that are Sydney and Melbourne. In a true case of cause and effect, this brought the rest of the nation down. In general, 2018’s “property crash” was marked by:
- Tighter lending criteria, especially for interest only loans
- Weakening foreign investor activity
- A rise in listings with fewer buyers in the market
- A drop in clearance rates to the lowest levels in 20 years
- An oversupply of units in some states
Although a fairly flat year in Adelaide, compared to the Sydney and Melbourne markets it wasn’t too bad. 2018 saw continued moderate growth in house prices despite challenging economic circumstances, which saw the local economy in troubled waters with the close of the automobile manufacturing industry in 2017.
Yet, with a market that is valued fairly and a strong local jobs economy in the health care and social assistance sectors along with the state’s flourishing wine and tourism industries, the region has kept afloat and experienced moderate growth.
According to the QBE’s Australian Housing Outlook 2018-2021 Adelaide’s performance in 2018 varied by area. The report found that the city's middle ring performed the strongest (+3.6%), while outer suburbs maintained steady growth (+3.3%). The inner suburbs saw the biggest falls (-7.8%).
Despite adversities, the local market has remained steady with a collective 3.0% rise in annual growth and a median house price of $493,900.
Adelaide property market forecast 2019
With the shutdown of the automotive industry, Adelaide investors are still acting with caution. However, the shipbuilding industry is set to take over and the state’s unemployment rate has been improving in recent years. QBE forecasters predict that Adelaide’s median house price will grow a cumulative 12% by June 2021 to reach $555,000.
"QBE forecasters predict that Adelaide's median house price will grow a cumulative 12% by June 2021 to reach $555,000."
Regarding units, QBE forecasts a softer demand in 2019 and the following years, which could see a modest 6% increase in the median unit price to reach $400,000 by June 2021.
The conditions that contributed to continued growth in 2018 are forecast to continue and possibly even improve in 2019 and beyond. With relative affordability and moderate population growth combined with greater defence and infrastructure commencements, Adelaide looks certain to remain on solid footing.
Easement in dwelling commencements are also helping the situation as a current excess of dwelling stock becomes absorbed and price growth should continue to rise at about 4% per annum.
SQM Research, on the other hand, is slightly less optimistic. They're forecasting a small decline in their base predictions for the coming year, with a -1% to -3% drop in the Adelaide property market growth and the view that, if the banks intervene, there could be property growth of 0% - +3%.
The rental market is strongly favouring landlords with a tight vacancy rate of 1.2%, seeing rents in the region rising rapidly. Rents have increased by 2.6% for Adelaide houses to sit at $387 per week, while units have seen a 3.4% rise at $299 per week. According to SQM Research, rents are predicted to rise a further 3%-5% in 2019.
How are Adelaide house prices expected to change in 2019?
Leading property analysts agree that Adelaide will remain in a stable position with continued moderate growth.
QBE’s Australian Housing Outlook expects Adelaide median house price growth of +4% per annum for the period of 2019 to 2021, bringing the median house price to $550,000. On the other hand, units are projected to rise to $400,000 - a +6% increase on current levels.
Louis Christopher's Housing Boom and Bust report forecasts the Adelaide market to continue performing quite flatly in the year ahead ahead, with drops and rises of -1% to +3%. His scenarios include:
- -1% - +3% with an unchanged cash rate, slowing economy and Labor government
- -2% - +2% with a 0.20% interest rate rise by the banks, cash rate unchanged and a Labor government
- +0% - +3% with a 0.50% rate cut passed on by the banks, and a Labor government
Predicted with a Labor victory in mind for the next Federal election, Christopher believes the proposed policy that would see Labor making changes to the capital gains tax and repealing negative gearing, would impact property prices negatively.
Is unit oversupply an issue in Adelaide?
With many new dwelling projects still in the pipeline, South Australia has been experiencing an oversupply in units since 2015. Oversupply is largely affecting regional South Australia, however, vacancy rates have increased 2.3% in Adelaide in the June quarter of 2018 and this is expected to continue rising for the short term due to a high number of completions on the horizon.
"With many new dwelling projects still in the pipeline, South Australia has been experiencing an oversupply in units since 2015."
With a softer demand for apartment living combined with the oversupply, price growth will be more restrained in this market. A push from the Liberal government to increase population growth rates could help bring about future growth.
Best suburbs to invest in Adelaide
With Adelaide looking to remain steady for the next three years, there will still be plenty of affordability.
So, where are the best suburbs to buy in Adelaide?
Stick to the middle and outer suburbs at the moment as they offer both affordability and better price growth, rather than in the inner city suburbs.
Investment property hotspots tipped to look out for in Adelaide in 2019 include:
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