Adelaide’s southern house values up amid tight market

Suburbs up to 40km south of Adelaide experienced “substantial” price rises in the past two years as buyers sought to invest or rent in an attractive lifestyle region, according to analysts reviewing the past year’s real estate performance around the nation.

Jan 02, 2024, updated Jan 31, 2024
Southern suburbs such as Christies Beach are seeing a surge in property prices and rents.

Southern suburbs such as Christies Beach are seeing a surge in property prices and rents.

Australian property prices are still lifting but the more muted pace of growth suggests affordability constraints are starting to bite, with one economist predicting another leg down for the national housing market in 2024.

Nationally, home values lifted by 0.4 per cent in December, with prices up 8.1 per cent in the 2023 calendar year as tracked by CoreLogic.

The monthly growth was the smallest gain since prices started rising again in February 2023 after a decline in 2022.

While poor affordability and more new listings kept price increases in the two biggest capital city markets in check, another month of convincing growth in Adelaide, Perth and Brisbane was recorded.

Dwelling values across these cities have been rising by about one per cent a month since May, based on monthly home value index.

Real Estate Buyers Agents Association of Australia (REBAA) president Melinda Jennison said the trajectory of Australia’s property market in 2023 was a testament to its resilience and adaptability.

“Regional variations, supply-demand dynamics, and changing rental landscapes have all played pivotal roles in shaping this narrative,” Jennison said.

“The intricate interplay of factors continues to shape the nation’s property landscape, creating an environment where vigilance and adaptability remain key for both buyers and sellers.”

Strong rental growth, driven by the tightest rental market on record, resulted in substantial increases in both house and unit rents around the nation this year, she said.

“Adelaide and Brisbane led the charge in January, with the most substantial increase in annual house rents, according to CoreLogic. However, by October, the scene had shifted, with Perth and Melbourne taking centre stage in the annual house rent increase rankings,” Jennison said.

According to REBAA South Australia state representative Jess Elam, the state’s strong performance stemmed from a scarcity of available properties and consistently high demand.

“As a result, buyers have remained fiercely competitive, driving property prices upward,” Elam said.

“Specific regions within South Australia have witnessed significant growth. Suburbs along the southern coast have experienced substantial appreciation over the past two years, and this momentum has carried into 2023.”

Elam said the suburbs, all 20 to 40 kilometres from the CBD, offer easy access to the city, proximity to stunning beaches and wineries in McLaren Vale, family-friendly neighbourhoods and an array of lifestyle amenities.

“This combination of factors makes them attractive to both investors, who benefit from low vacancy rates and high rental yields, and families seeking a lifestyle change, including interstate homebuyers choosing South Australia,” she said.

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“The rental market has seen increased demand in both regional and city areas, driven by a rise in relocations, has created a housing landscape marked by heightened competition, reduced supply, and elevated rents.”

Elam said this shortage, particularly for properties under $600 per week, has increased the allure of property investment.

“South Australia’s rental market, especially in Adelaide, is undergoing significant changes, emphasising the importance of comprehending these shifts for both renters and investors,” she said.

“Looking at the overall outlook for South Australia’s housing market, it appears robust. The state has consistently demonstrated growth, supported by steady population growth, ongoing infrastructure upgrades, and its appealing lifestyle.”

CoreLogic research director Tim Lawless said widening disparity across cities and regions was a defining trend of 2023.

“Such diversity across the capital cities can be broadly attributed to factors relating to demand and supply,” Lawless said.

He said affordability constraints in the Adelaide, Perth and Brisbane capitals were not as severe as in Melbourne and Sydney.

“And advertised supply levels have remained persistently and substantially below average,” he said.

AMP chief economist Shane Oliver said property markets were at risk of another leg down, with price growth already starting to slow.

Easing auction clearance rates was another sign housing demand was struggling to keep up with a better supply of listings as well as stretched affordability from higher mortgage rates and cost of living pressures.

“The supply shortfall in the face of strong immigration had the upper hand in 2023, but high interest rates and their lagged impact along with poor affordability now appear to be starting to reassert themselves,” Oliver said.

Under these conditions, the group’s economists expect national home values to fall anywhere between three and five per cent in 2024.

“Of course, there is likely to be a big range around this with Sydney and Melbourne more at risk given higher debt levels but Adelaide, Brisbane and Perth are likely to remain relatively stronger with lower listings, a benefit from interstate migration and lower debt levels,” he said.

Prices should bottom out by mid-year and start recovering later in 2024, Oliver predicted, as the Reserve Bank is likely to start cutting rates.

– with AAP

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