Adelaide Property Market News July 2023
Adelaide Property Market News (July 2023).
With 12 interest rate increases from the Reserve Bank of Australia (RBA), which have seen official cash rates rise by 4% over the last year, property prices across Australia have not only stopped falling, they’re now on the rise.
Figures show the housing property market has defied many economists and market analysts, moving through the bottom of the cyclical downturn early this year.
We are seeing housing values stabilising or rising across most areas of the country, but a number of other indicators are also confirming the positive shift which is only strengthening.
Auction clearance rates are very strong, property buyer confidence has lifted and more properties for sale are coming on to the market.
Each state is at its own stage of the property cycle and within each metropolitan capital city area there are suburbs with property values still falling, some remain stagnant while within many others housing values are again rising. In fact 35% of suburbs experienced rising real estate values in recent months.
Australian Property Prices
So what is driving up prices?
Housing demand is high. An increasing number of smaller household sizes mean we need more homes for the same number of people, before we look at the impact of immigration and those coming in on visa’s.
Until supply meets demand, the increase in property prices seems likely to continue, especially within the rental market where there is a severe shortage of rental properties.
Salvan Property Management, with over 20 years real estate experience, are well placed to help you with your investment property.
Property managers from Salvan use a hands-on approach, allowing you to have a stress-free experience as the day-to-day issues with tenants are dealt with by professionals.
The following table quantifies what has happened with regards to property prices, state by state over the last month, quarter, 12-month period with total return on investment and median property values across Australia.
The table also serves to highlight how strong the Adelaide property market is and from an investment point of view, how strong the Adelaide rental market is too as your mortgage is paid by tenants along the way to realising the capital growth at the end, when you are ready to sell.
Property Price Change Across Australia (as at 31 July, 2023)
| State | Month | Quarter | Annual | Total Return | Median Value |
|---|---|---|---|---|---|
| Adelaide | 1.4% | 3.2% | 1.0% | 4.7% | $671,755 |
| Brisbane | 1.4% | 4.2% | -6.2% | -1.9% | $735,394 |
| Canberra | -0.1% | 0.7% | -7.9% | -4.1% | $839,507 |
| Darwin | 0.3% | 1.2% | -1.2% | 4.4% | $488,363 |
| Hobart | 0.0% | 0.1% | -11.4% | -7.4% | $655,984 |
| Melbourne | 0.3% | 2.0% | -4.0% | -0.8% | $766,912 |
| Perth | 1.0% | 3.2% | 3.4% | 8.3% | $598,074 |
| Sydney | 0.9% | 4.5% | -2.1% | 0.9% | $1,082,129 |
(Adelaide has been a consistent performer with a solid return on investment)
With the return of international students after COVID competing with an increase in population, especially within the rental market driving up rental prices, property prices are sure to increase too.
(Adelaide’s growth in July led the country along with Brisbane)
The following table highlights the growth in units over housing as cost of living factors and lifestyle weighs in.
| State | Dwelling | Asking Price | Rolling Month % Change | 12 Month % Change |
|---|---|---|---|---|
| Houses | $779,490 | 0.1% | 8.3% | |
| Adelaide | Units | $414,223 | -2.1% | 15.4% |
| Combined | $714,083 | -0.1% | 9.0% | |
| Houses | $977,401 | 0.9% | 6.2% | |
| Brisbane | Units | $526,762 | -0.3% | 15.3% |
| Combined | $866,101 | 0.7% | 7.3% | |
| Houses | $1,028,440 | -1.1% | -5.1% | |
| Canberra | Units | $597,864 | -1.3% | 4.5% |
| Combined | $874,090 | -1.2% | -3.0% | |
| Houses | $673,174 | -1.1% | -0.4% | |
| Darwin | Units | $379,009 | -0.1% | 0.8% |
| Combined | $557,964 | -0.9% | 0.5% | |
| Houses | $790,860 | 0.8% | 0.3% | |
| Hobart | Units | $524,628 | 2.3% | 8.7% |
| Combined | $751,200 | 1.0% | 3.8% | |
| Houses | $1,182,394 | -0.2% | 1.8% | |
| Melbourne | Units | $586,857 | -0.6% | 0.2% |
| Combined | $998,313 | -0.3% | 1.3% | |
| Houses | $829,238 | -1.4% | 9.1% | |
| Perth | Units | $445,658 | 1.0% | 9.2% |
| Combined | $730,223 | -1.0% | 9.0% | |
| Houses | $1,783,604 | -0.9% | 7.0% | |
| Sydney | Units | $769,862 | -0.6% | 7.5% |
| Combined | $1,378,538 | -0.9% | 6.7% |
Adelaide’s growth with regards to units over the last 12 months leads the nation
‘Experts’ have been divided in recent years with their forecast on interest rate rises. Some economists from the Australian banks are saying we’ve reached the peak, some are predicting a leveling out and some are saying a fall will occur of 1% (4 months of 0.25%) by Christmas 2023.
The media are also divided, with the Australian Financial Review quoted as saying:
Property Prices Will Fall 30%
A drop in the Australian property market of this magnitude has never happened before, not during the recession of the 1990s, not during the global financial crisis and not during the period of a credit squeeze in 2017-18.
National Australia Bank (NAB) Housing Price Forecast
The table below details what occurred during 2021 and 2022 with the NAB forecast for 2023 and 2024.
| Region | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|
| Adelaide | 23.2% | 10.1% | 3.0% | 3.7% |
| Brisbane | 27.4% | -1.1% | 5.4% | 2.9% |
| Hobart | 28.1% | -6.9% | -6.4% | 0.0% |
| Melbourne | 15.1% | -8.1% | 2.0% | 7.4% |
| Perth | 13.1% | 3.6% | 6.0% | 6.2% |
| Sydney | 25.3% | -12.1% | 6.9% | 4.9% |
(% change to Q4 of each year, 2023 & 2024 are the forecasted price increases)
Why the Outlook for the Property Market is Positive
The following list highlights the reasons why property is a sound investment, today and most importantly in to the future.
-
Size of Household Becoming Smaller
Since the beginning of 2020, the RBA has reported a decline in the average household size. As young adults leave home for example, they take an additional one or more dwellings, where before the family unit just took up one. People are living longer too, occupying their home for longer.
This increases the demand for housing as more dwellings are required for the same number of people. -
Increase in Immigration
Net immigration increased to 320,000 in 2022, up from just 5,940 in 2021, increasing demand for approximately 125,000 additional dwellings.
With additional refugees, students on visa’s and overall immigration expected to increase across 2023 and 2024, the demand will only become stronger.
-
Low Rental Vacancy
Capital city rental vacancy rates are below 1%, driving up rent costs, attracting more savvy investors to the property market, but not enough.
Metro Area Median Rent 12 Month Rents Gross Yield Vacancy Rates Adelaide $554 9.20% 4.06% 0.40% Brisbane $623 9.50% 4.22% 1.20% Canberra $666 -3.00% 4.01% 2.30% Darwin $606 3.00% 6.53% 1.30% Hobart $546 0.7% 4.21% 2.8% Melbourne $560 12.90% 3.48% 0.90% Perth $605 13.50% 4.87% 0.70% Sydney $735 12.4% 3.12% 1.60% As you can see from the table above, Adelaide is a strong and consistent performer against other capital city regions and given the aging population and lowest vacancy rates in the country, demand for housing is set to remain strong for many years to come.
-
Small Number of Listings
The number of listings of properties for sale is 25-30% lower than 12 months ago. This in turn typically forces prices up for sellers as demand dramatically outstrips supply.
-
Interest Rates
Economists across all sectors are talking up inflation has peaked, or at least almost peaking, providing support for the property market.
-
Auction Clearance Numbers
The number of properties sold at auction, not being passed in, is strong and rising, typically a correlation to property price trends and the strength of the overall property market.
-
Government Support
First home buyer schemes and other initiatives are always good for boosting the demand for property.
While we have painted a rosey picture of the property market and the Adelaide rental market in general, there are still a few unknown factors at work, especially from a global perspective. Rising household debt is still going to become an issue for some as the impact of variable rate hikes from standard rates kicks in over the next few months, lowering affordability.
Weak global growth as demand becomes exhausted from the pandemic with the possibility of rising unemployment may put a dent in the escalation of growth in the property market across Australia, but for all the reasons outlined above, the Adelaide property market and particularly the Adelaide rental market are set to stay resilient to these events, should they indeed occur.
For a property market to ‘crash’ there must be a large number of forced sellers and nobody on the other side of the transaction to purchase their properties meaning they have to sell their properties at significantly lower prices.
Home sellers are also homebuyers as they have to live somewhere and the only reason they would be forced to sell and give up their home would be if they were not able to keep up their mortgage payments.
This happens when:
- Unemployed levels are high. Today almost anybody who wants a job can get a job.
- Mortgage costs (interest rates) skyrocket. Despite rising interest rates, they are only like to get to where they were before the pandemic a couple of years ago and borrowers were coping then.
What happens next to the Adelaide property market will be partly shaped by the speed and extent of further interest rate tightening’s, but there are still many positive factors underpinning our housing markets which means that the property crash which a few property pessimists are predicting is unlikely to occur.
Throughout history, neither the banks, governments or the RBA want to see a housing market crash and they’d rather support mortgage holders than take over their homes.
The total value of Australia’s residential property market is now worth $9.7 trillion after growing at the fastest annual pace on record in 2021.
Residential property prices rose 23.7% through 2021, meaning that the collective value of the wealth of property owners increased by $2 trillion in just one year alone!
While many homeowners and property investors took on more debt, the total of all the loans outstanding against all the residential real estate in Australia is $2.1 trillion, put another way, the ‘overall’ Australian housing market has a very low (23%) Loan to Value ratio.
Population Growth Projections
Australia’s population growth is projected to return to around 355,000 by 2024/2025, before easing to around 330,000 per annum by 2032 in line with the reduction in the natural increase and we’re just not building enough dwellings to keep up with the demand.
Summary of Fundamentals Underpinning the Property Market
Why there are advantages to becoming a property investor in 2023.
- There is a shortage of good properties for sale and virtually no properties to rent
- Immigration is increasing and increases the demand and price, especially in inner city areas, popular with overseas students wanting to be close to universities
- There is not enough new construction in the pipeline. We’re just not building enough dwellings and increasing construction costs at a time of a shortage of labour means the end value of new projects will need to be up to 20% higher to make projects financially viable for builders and developers alike
- With our economy is still growing and with unemployment at historically low levels meaning almost anyone who wants a job can get a job, so they’ll be able to pay the mortgage repayments or rental payments
- Wages are growing, more income to service debt
- Household balance sheets are strong with many having savings, showing a surplus
- Most mortgage holders are ahead of their payments, in fact CBA reports 3/4 of their loans are about two years ahead on repayments
- Australia’s banking and lending system has been relatively responsible with their lending criteria, factoring in a 2-3% increase in interest rates as a buffer, meaning the number of non-performing loans is relatively small
- Government incentives to encourage first-home buyers into the market is a regular occurrence because the property market is a big driver to the overall economy of the state and country
There is a saying:
The best time to invest in the property market was 20 years ago, the next best time is today.
In 20 years’ time, people will be saying the same thing. Property investment is a long-term venture. There will be peaks and troughs along the way, but overall bricks and mortar will always prevail because we do have to live somewhere.
Capital Growth is Critical for Investment Success
Investors looking at getting into the market should have a discussion with a good property manager.
Salvan Property Managers have over 20 years’ experience in the property market and are experienced with the Adelaide rental market, knowing which suburbs are ready to take off next.
Renovating is also a way to get some capital growth, but knowing what to do and when is the key.
New housing developments can be a gold mine to Adelaide property investors, with some ‘liveable suburbs’ showing 100% growth in value over a decade.
Rent Prices Set to Increase
Australia, but in particular Adelaide is in a rental crisis. The demand is extremely high and won’t be abating any time soon.
Increased rental demand during a time of very low vacancy rates will see rentals continue to rise throughout the next few years, boosting yield and property values.
As more foreign students come into the state, coupled with a desire for young adults to move out, apartments and units are in the highest demand.
Soon 40% of Australia’s population will be renters, partly because of affordability issues in the eastern states but also because of lifestyle choices.
Adelaide has continued to stand out as the nation’s strongest capital city housing market.
Through the last 25 years, Adelaide housing values have increased by 44% adding roughly $197,000 to the median dwelling value. Most of this growth has been centred in the housing market rather than units, with values up 48% through the cycle to date, while unit values are up a smaller 23%. One of the key factors pushing up prices is the ongoing shortage of advertised supply.
However, the Adelaide property market has now joined the rest of Australia in its housing slowdown falling 0.2% in the last month, but still up 44.2% since the pandemic began in March 2020.
| Metric | This Quarter | V Decade Average |
|---|---|---|
| Dwelling commencements | 3,568 | +22.6% |
| Unemployment | 4.0% | -35.8% |
| Population Growth | +0.96% | +2.5% |
| Economic Growth | $145,243M | +24.3% |
| Equipment Investment | $926M | +13.7% |
| Housing Finance | $945M | +16.5% |
| Retail Spending | $6,105M | +10.8% |
| Construction Work | $3,764M | +23.8% |
(Note: SA ranks first on construction work and dwelling starts)
With the help of Salvan Property Management, you can be a property investor reaping the benefits of Adelaide’s property market.
