Adelaide's housing market forecast to see slow but steady growth: Moody's Analytics

South Australia’s housing market is forecast to remain relatively subdued with slow but steady growth, according to the latest report from Moody's Analytics.

Moody’s Analytics have forecast housing values will pick up slightly in 2019, while apartment values will likely be weak off the back of a slow 2018.

Greater Adelaide is expected to see sustained housing growth of 2.6% in 2019 and 3.6% in 2020, a small improvement on 2018, while apartments are forecast to see subdued growth as in the trend of previous years.

The Central and Hills region of Adelaide is forecast to see housing growth of 2.5% in 2019 in line with greater Adelaide and slightly less growth in 2020, while apartments are expected to stabilise after making a small loss last year of -0.8%.

Adelaide North is forecast to have greater growth in 2020 than in 2019 reaching 4.6% an improvement on its previous performance, while apartments are forecast to continue a small downward trend in 2019 and 2020.

The Southern Adelaide region is forecast to have the strongest housing growth in Adelaide growing 3.7% in 2019 and 4.9% in 2020, while apartments are forecast to have slow growth in 2019 of 1.4% and the strongest apartment growth of any SA region in 2020 at 3.9%.

Western Adelaide is forecast to see small growth in housing prices in 2019 and 2020 of 2% and 2.9% respectively, while apartments are expected to have a strong 2019 with growth of 3% lower than their 2018 growth of 4.5% before slumping to a loss in of 2.9% in 2020.

The rest of SA is expected to be continued a trend of home price weakness in 2019 with a loss of -0.6% forecast by Moody's Analytics, however in 2020 a recovery has been predicted with growth pegged at 4.2%.

Barossa, Yorke, and Mid North SA are predicted to experience weakening house prices in 2019 before experiencing a pick up in 2020 of 3.4%, after experiencing price growth in 2017 and 2018.

The Outback region of SA is forecast to see price falls of -10.2 throughout 2019 continuing a trend of price falls before bouncing back in 2020 to grow 5.6%.

South East SA is forecast to have consistent price growth in 2019 (3.9%) and 2020 (4.1%) after seeing a reduction of -0.6% last year. 

The report authors note, "although low population growth has dampened home values, a recovery in employment growth, coupled with increased incomes over the next few years, could result in pockets of South Australia outperforming the rest of the state."

The dwelling market in Adelaide-North is likely to remain mixed with house values expected to accelerate while apartment values remain subdued.

Overall, population growth has supported home values; nearly 50% of the total population gain in Adelaide has been in Adelaide-North in 2016-2017.

However population growth is expected to moderate.

The report said, "the Adelaide-Central and Hills region enjoyed a strong run in 2017, but values have slowed in 2018, and a slow recovery is likely in 2019."

"Moreover, a strong runup in apartment supply since 2014 has prompted apartment values to fall in 2018, and only a small recovery is likely in 2019 and 2020."

"A higher supply—with around 1.4 apartments approved for every home approved since 2015—will limit apartment value gains in the region," the report stated.

Moody's Analytics forecast that slow population and income growth will weigh on the South Australian housing market.

They have also predicted that high rental values will keep the Adelaide housing market stable and prevent a sharp collapse seen elsewhere nationwide.

Notably, agriculture commodity prices are expected to remain subdued, while the Australian dollar is unlikely to fall further.

These external developments will limit income gains across the Barossa-Yorke-Mid North and South Australia-Outback regions in the coming years.

Consequently it is forecast the housing market there is will correct further in 2019 before a recovery takes place in 2020.