Adelaide property market continues to be driven by interest rate and political elections: HTW residential

Adelaide property market continues to be driven by interest rate and political elections: HTW residential
Adelaide property market continues to be driven by interest rate and political elections: HTW residential

Of the many economic, social and political drivers that influence the South Australian property market, two major drivers continue to be the most prevalent - interest rate movements and political elections, according to a recent Herron Todd White (HTW) residential report. 

The current COVID-19 epidemic is going to have a negative impact on key drivers, so it will be interesting to see what impact this may have on the property market in the short to medium term, the valuation firm said.

The report suggests these two factors are the most visible to the market being heavily publicised in both print and digital media.

"Interest rate movements are front of mind for first home buyers whilst they directly correlate to a current mortgage holder’s hip pocket," the valuation firm said. 

A rate reduction can allow a first home buyer to enter the market whilst an increase could be the forcing hand for an investor to start selling.

"Political elections can act as both a hand brake and accelerator," the valuation firm said 

In a pre-election time, market activity can slow given the many unknowns surrounding opposing parties’ election promises. Post-election, the market can see where the goal posts lie and move forward with certainty and stability.

Additionally 100,000 South Australians making up nearly six percent of the state’s population are employed in the public service. Pre-election public servants would be wary of becoming active in the property market with the uncertainty a changing government could have on their employment.

"On a micro level, property markets by region are influenced by a number local drivers," the valuation firm said. 

Broadly the inner and middle rings are influenced by barriers to borrowing and lifestyle choices; the outer ring is influenced by affordability and local employment whilst regional South Australia is influenced by local industry, particularly mining and agriculture, and population movements.

Of most significance in the current market is the record low cash rate of 0.5 percent.

"Broadly, we are seeing first home buyers, upgraders, empty nesters and investors all active in the market. The mouth-watering prospect of finding either a fixed or variable home loan rate of sub three percent could be too good to pass up. The activity of these buyers in the market is driving demand for a broad range of property types," the valuation firm said. 

Throughout the metropolitan area, character dwellings remain the most popular with the broad market, the HTW report noted.

Depending on location, entry points for these dwellings range from $500,000 to $800,000. Characterised by turn of the century cottages and quaint laneways, the inner south-eastern suburb of Parkside is popular for those seeking properties with heritage features.

Achieving a sale price of $683,000, 22 Robsart Street, Parkside (pictured below) typifies this property type. This is a character single fronted cottage providing two bedrooms, one bathroom, off street parking all situated on an allotment of 426 square metres.

Adelaide property market continues to be driven by interest rate and political elections: HTW residential

Metropolitan Adelaide has seen an increase in higher density townhouse style development. Driving this market within the inner ring are cashed up empty nesters looking to downsize whilst investors and first home buyers are behind the wheel in the middle and outer rings.

Within the inner ring, entry price points can be well into the $1 million range whilst within the middle and outer rings, $400,000 is typically the starting point.

Both the sales of 7A Linden Crescent, Linden Park (pictured below) and 16A Egmont Avenue, Warradale which achieved sale prices of $1.25 million and $545,000 respectively represent these similar property types in differing locations, the report noted. 

Adelaide property market continues to be driven by interest rate and political elections: HTW residential

Appealing to downsizers, 7A Linden Crescent, Linden Park maximises accommodation on a small allotment and includes high quality fixtures and fittings and is located within walking distance of Burnside Village. Appealing to investors and first home buyers, 16A Egmont Avenue, Warradale provides a standard fit-out and accommodation expected of similar stock within the middle and outer rings.

"The CBD apartment market is unique with each new tower providing product appealing to all buyer types," the valuation n firm said. 

Abiding by local planning guidelines and having knowledge of the broad market appeal, CBD apartment developers have to create a multitude of offerings at varying price points.

The recently constructed seven-level apartment complex Five O Six on Hurtle at 36 Hurtle SquareAdelaide provides an example of this product mix.

Throughout 2019, this building had transactions of multiple apartments with varying floor plans with sale prices ranging from $465,000 for a two-bedroom, one-bathroom, one car space, sixth floor apartment to $2.65 million for a three-bedroom, three-bathroom, four car space, seventh floor apartment.

"There are a multitude of factors driving the South Australian property market on both a macro and micro level. These drivers aid in the decision making of both purchasers and vendors.

"Awareness of these drivers and the understanding of their effects on the market are critical to making the right decision when the time comes." 

Note regards COVID-19
This edition of Month In Review had its topic defined in late February with submissions from our offices collated through to late March. During this period, shifts in the social and economic landscape due to COVID-19 became increasingly dramatic, as demonstrated by the varied information provided by offices over the course of three weeks.
This month’s residential theme on baseline property market drivers remains a common thread, and provides an indication of what influences to monitor as the property sector recovers post-crisis.
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Adelaide Htw

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