South Australia: Looking for the diamonds amongst the rough

A common mistake made by commentators, analysts and investors is to write off an entire region or state because that jurisdiction is under-performing generally.

That attitude overlooks the reality that, regardless of the overall economic or market performance of a broad region, there are always exceptions and out-performers within it.

I’m thinking in particular of South Australia. Few people rate the state or its capital city as places to explore for investment opportunities because the state overall is an economic under-achiever.

In a way it’s understandable. The only reason SA doesn’t rank last on economic indicators is that Australia also has a place called Tasmania. SA is second last in the nation on economic growth, population growth, retail trade and employment.

But, even within such an environment, there are always sub-markets that perform for local reasons. Last year Port Lincoln and Whyalla, two solid regional centres out on the Eyre Peninsula, both had strong double-digit growth in their median house prices.

And, as 2014 cranks up, property in SA is showing signs of more widespread growth, despite those poor economic indicators.

One aspect where SA is above average is building approvals. In the past 12 months they have risen 23% in SA, compared with the national average rise of 16%. Another is lending to home buyers, up 8% in the past 12 months, a little higher than the national average.

There are other signals that Adelaide markets are set to rise in 2014. Many suburbs in the SA capital have rising sales activity, as measured by the number of houses and/or apartments sold quarter by quarter.

Rising sales volumes generally translate into rising prices, with a time lag.

One standout region of Adelaide is the Onkaparinga municipality in the south, where a number of suburbs have established patterns of sales volumes rising strongly or at least steadily. Star suburbs include Aldinga Beach, Seaford, Christie Downs, Flagstaff Hill and Woodcroft.

This region is getting a massive boost from infrastructure development, with the extension of rail links south to Seaford and a major upgrade to the main road link, the Southern Expressway.

The City of Campbelltown in the north-eastern suburbs of Adelaide is another notable area for sales activity; headed by the suburbs of Campbelltown, Tranmere, Athelstone, Magill, Newton and Paradise. These locations tend to have middle-market prices with median in the $400,000s.

Regional centres with growing sales volumes include Murray Bridge, Strathalbyn, Port Lincoln, Wallaroo and the Victor Harbor area.

The appeal of South Australia for property investors includes pricing levels. Adelaide continues to be the cheapest state capital outside Hobart. Most the locations mentioned have affordable prices, as well as solid growth drivers.

Terry Ryder is the founder of hotspotting.com.au.

You can contact Terry via email or on Twitter.