Time will improve Adelaide's property market as uncertainty around economic conditions linger: Herron Todd White

The Adelaide residential property market reached the bottom of the cycle in the second half of 2012, according to property valuers Herron Todd White.

Since that time, HTW says there has only been minimal improvement to property values overall, which is somewhat expected given the uncertainty surrounding current economic conditions, both locally and federally.

HTW believes that Adelaide’s property market will gradually recover over the next few years.

The firm believes that the average potential buyer is more conservative and reluctant to commit to any further financial pressure, due to job security and the cost of living expenses.

Also contributing to people’s reluctance to commit to major financial decisions is the federal election later this year and the state election in March next year. 

“Especially as it is speculated that both federal and state will see a change of government – this usually occurs in the lead up to an election but is expected to be somewhat offset by an increase of activity once the vote has been finalised whatever the outcome.”

The firm says the recent reduction in interest rates was welcomed, however they believe many will use their current position to increase savings and pay back debt rather than add to any existing debt overall.

Herrod Todd White believe that the suburbs closer to the city will be the ones to improve in value first and show the best growth.

This growth will be driven by upgraders looking to move into more desirable suburbs, while also taking advantage of the price corrections that occurred over 2011 and 2012.

“Well located and appointed dwellings are selling fairly quickly within many of these suburbs when priced to meet the market, however there currently exists numerous factors holding back this market sector.

“These include there being limited stock coming onto the market so many potential buyers just can’t find what they are looking for.

“With limited properties on the market buyers often find it harder to make decisions because they can’t directly compare properties; difficult selling conditions mean that many upgraders are worried about selling their own properties and therefor choosing not to act; and with less potential buyers looking, or should we say, with less potential buyers willing to actually commit there is not enough competition between buyers in the current market to push up prices just yet.”

HTW says the recent interest rate cut may improve this situation a little but mostly it will just be time that improves Adelaide’s residential property market.

“If we roughly divide this market into two price brackets, we suggest $400,000 to $750,000 will secure an older detached three-bedroom, one- to two-bathroom dwelling or a newer (often attached) dwelling on a smaller allotment around seven to twelve kilometres from the city.

“Or $750,000 to $1.2 million for an older character three to four-bedroom, one- to two-bathroom detached dwelling or a newer dwelling (potentially attached) on a smaller allotment up to seven kilometres from the city or located within beachside suburbs.

The firm says properties that are better located and close to established and popular amenities have the best potential for capital gains.