Signs of life but no great expectations for Adelaide property market
Expectations for the Adelaide housing market appear modest at best following the RBA’s assistant governor’s Christopher Kent's comment last month that this market has been “quite flat for a few years”.
The latest Australian Property Monitors (APM) data has Adelaide house prices up 0.4% over the year to January with units down 5.2%.
Both dwelling types recorded gains of 1.5% over the January quarter with a median house price of $438,000 and a median unit price of $276,000.
“The Adelaide housing market can look forward to modest price growth for 2013, with all indicators pointing to a slight improvement,” says APM in its latest report.
Other APM indicators also suggest the Adelaide market is heading in the right direction with average days on market reducing from 150 days a year ago to 136 as of February 2013, although the long-term average is 110 days.
The average discount required to sell a property has also reduced from 8.2% to 7.1% and is approaching a long-term average of 6.6%.
According to APM, there are 12,000 properties listed for sale in Adelaide, 7% less than a year ago but 13.5% higher than the long-term trend.
“Low interest rates will activate the Adelaide housing market through 2012, although activity levels and prices growth will be modest,” says APM.
“This is consistent with Adelaide’s house price cycle which is typically less volatile than the other major capitals.”
“Local economic performance may provide a continuing brake on housing market activity, with the latest ABS unemployment data reporting an Adelaide January unemployment rate of 6.7% – clearly the highest of all the major capitals and nearly a percent higher than the rate recorded over January 2012.”
In a further sign of future pick-up, February ABS building approval figures show a 23% lift in South Australian dwelling approvals.
“The strong result took the number of approvals to the highest monthly tally in over eighteen months. Hopefully this is a sign that the state may be emerging from the cyclical low,” said the HIA’s Geordan Murray.
Richard Thwaites, principal of the Kensington office for LJ Hooker, says the Adelaide market is on a "fairly level plain" but properties are selling.
“We had 12 registered bidders at an auction in Gilberton and 7 for a property in Rose Park - both lower to middle-end properties," he tells Property Observer.
“Both properties sold over the initial reserve price.”
Thwaites says there are people in the market place buying, but it is price sensitive.“Anyone who wants yesterday’s prices won’t sell,” he says.
He also notes investor appetite, due to people being wary of super and wanting a “second bite of the cherry”.
Closer to the CBD always perennial always a market, there are buyers, but being circumspect as to how much they will spend.
He says there are also a number of people looking to upgrade as families.
“They don’t want to travel too far to go to school, but they are not selling before they buy.
At the upper end of the market ($1.5 million plus), the perception is that there is no rush to buy.
Thwaites says the sentiment is: “If I miss out on this one, I won’t get caught out by price. Prices won’t jump 10%.”
In its latest April market wrap, valuers Herron Todd White reports that the Adelaide residential market is “not really moving in any direction” and says it could be in for an “extended period of flat-lining”.
On a more positive note, HTW says that property values appear to have reached the bottom of the cycle and now are holding fairly steady.
“Houses are being bought and sold but transaction volumes remain low while it appears that more people are currently looking or showing interest in residential property than there has been for a couple of years, there is still a reluctance to actually act,” says HTW.
HTW speculates that the overall lack of market activity is holding back upgraders over concerns they may not be able to sell their existing home or that they may have to sell for less money than they think their house is worth or in fact less than they paid.
“We believe that second and third home owners are probably the most active in the market at the moment.
“With property more affordable than at its peak late in 2010, there are those looking to take advantage of the situation and are currently looking to upgrade to larger dwellings or relocate into more desirable suburbs.
“Prestige property also appears to be selling quite well once released to market and with recent price corrections can offer very good value for money.
“Currently first home buyers do not appear to be very active and this may be due to concerns over job security, cost of living and general uncertainty.”