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Adelaide Housing Market Insights: February 2021


The Urban Developer’s latest Adelaide housing market insights reveals the city is set to take the lead in 2022 as Sydney’s housing boom starts to fade.

This resource, updated periodically, will collate and examine the economic levers pushing and pulling Adelaide’s housing market.

Combining market research, rolling indices and expert market opinion, this evolving hub will act as a pulse check for those wanting to take a closer look at the movements across the market.



Adelaide median property prices % change

TypeMonthQuarterAnnualMedian
All2.2%▼7.4%▲24.8%▲$584,629▲
Houses2.3%▼7.9%▲27.3%▲$636,853▲
Units1.5%▲4.4%▲9.5%▲$393,036▲

^Source: Corelogic - January 2022

Adelaide is fast becoming one of Australia's most desirable capital cities, recording the fifth-highest increase in house price values in 2021.

The city has continued to show the strongest growth momentum, alongside Brisbane, as it continued to benefit from heightened interstate migration, driven by affordability and livability.

Adelaide’s house prices have increased by 24.8 per cent in the past 12 months, with the median price now $584,629, following a peak-to-trough fall in values of -0.2 per cent at the onset of the pandemic between April and September 2020.

Adelaide's monthly rate of growth has continued to gain steam since peaking in March 2021, when dwelling prices reached a monthly growth rate of 1.5 per cent—the fastest four-week increase the city has experienced since December 2007.

Across January, dwelling prices slowed from a record 2.6 per cent gain in December pulled down by slightly subdued house price growth.

According to Corelogic, property values lifted by 2.2 per cent in January, providing sellers with a gross yield of 3.8 per cent.

The average house in Adelaide is now selling for $637,000—after advancing by an average of $15,000 over the month of January, and units for $393,000 with a gain of $7000.

A typical Adelaide house is now about $132,000 more expensive when compared to 12 months ago, while units have experienced a gain of $49,000.

Beaumont experienced house price gains of 52.1 per cent over 2021 to $1.65 million, with Glen Osmond up 49.2 per cent to $1.5 million, St Georges rising by 49 per cent to $1.64 million and Wattle Park also hitting increases of 46.3 per cent to $1.32 million.

Sellicks Beach recorded the highest growth in value in Adelaide at the tail end of 2021 amid strong demand for bigger family homes and coastal locations.

The outer southern suburb had an annualised price growth of 57.8 per cent in the three months to November and has a current median sales price of $511,000.

The top five price suburbs for growth in Adelaide are Rosslyn Park, Salisbury North, Medindie and Glen Osmond, all of which recorded three-month annualised price growths greater than 40 per cent.

ANZ recently lifted its house price forecast for Adelaide’s growth by nearly four-fold to 11 per cent, amid the stronger than expected market momentum recorded at the start of the year.



Adelaide’s housing market: policy updates and trends

RBA warns about big mortgages as rates rise

Reserve Bank governor Philip Lowe has warned home buyers with big mortgages will be a weak spot in the economy when rates are lifted above record low levels as the nation’s biggest lender increases fixed rate mortgages.

Interest rate rises across different countries are unlikely to be synchronised with differing rates of inflation, but there are risks to economies with heavily indebted households.

First home buyers squeezed out of hot South Australia market

A combination of rising house prices and an influx of investors to the market is squeezing out first home buyers in South Australia.

Despite the continuing menu of grants at state and federal level, younger home buyers have had to deal with a steady increase in absolute prices which in turn demand ever larger mortgages.

International border reopening to add to rental squeeze

The country’s international borders reopened for double-vaccinated tourists, international students, and other visa holders on February 21 for the first time since March 2020.

The return of migrants and international students from next week is expected to put more upwards pressure on rents but have little impact on house prices and is also expected to lead to a spike in demand for units, which have been less sought after throughout the pandemic as tenants and buyers looked for more spacious abodes.



What the experts are saying about Adelaide's housing market

Tim Lawless
Head of Research
Corelogic


“The only broad regions avoiding a slowdown in the pace of growth in housing values are Brisbane, Adelaide and regional Queensland.

“These markets are benefiting from a healthier level of affordability compared with the largest capitals along with a positive demographic trend and consistently low advertised stock levels.”

Nicola Powell
Chief of Research and Economics
Domain


“Demand for Adelaide property remains strong as the number of homes sold reaches its highest point on record.

“This has produced two of the steepest quarters of house price gains the city has ever seen leading to the strongest annual uplift on record at 27.5 per cent, or $432 a day.

“Inquiries from prospective buyers jumped 34 per cent over the December quarter compared to the same time the previous year and 20 per cent of inquiries came from interstate.


Shane Oliver
Chief Economist
AMP Capital


“I was thinking prices would have peaked nationally probably September, October and then start to decline into next year, whereas if we start getting rate hikes in August or earlier, that peak could come around the middle of the year, in prices, or a little bit earlier.

“For the past four months or so we could actually be looking at price declines.

“For next year I was forecasting a decline of 5 to 10 per cent, it just brings forward the timing of that decline.”

Louis Christopher
Managing Director
SQM Research


“The drop in rental vacancies was expected due to seasonality, but that the drops are larger than expected.

“And worse for tenants, the weekly rental listings in February to date have fallen further for our two largest capital cities," Mr Christopher said.

“All this represents an acute shortage of rental properties.



Adelaide housing market forecasts

ANZ has recently tipped house prices to jump by 11 per cent in 2022 in Adelaide amid the stronger than expected market momentum recorded at the start of the year, before falling by 5 per cent in 2023.

CBA now expects Adelaide house prices to increase by 6 per cent next year before plunging by 8 per cent in 2023 after the Reserve Bank ramps up interest rates.

NAB is forecasting national house prices to rise by 3 per cent in 2022 before declining by around 10 per cent in 2023 with Brisbane and Adelaide expected to experience less significant falls.

Westpac has also updated its property forecasts, with Adelaide real estate prices tipped to surge 8 per cent between 2022 before dialling back -2 per cent in 2023.



Adelaide auction clearance rates

WeekClearance rateTotal Auctions
Week ending 8 January 2022N/AN/A
Week ending 15 January 2022N/AN/A
Week ending 22 January 202278%84
Week ending 29 January 202283.6%194

^Source: Corelogic - January 2022

Despite the discernible price increases, however, Adelaide is still considerably more affordable than other capital cities like Sydney, Canberra or Melbourne. 

Adelaide now has 69 suburbs with a median house price of $1 million or more compared to the same time last year when just 30 suburbs had breached that threshold. Prior to the pandemic just 23 suburbs were in the million-dollar median club.

Since October 2021, 14 suburbs have recorded a significant increase in their median house value and are the newest to join the million-dollar suburbs.

From the city fringe to the Adelaide Hills, the new suburbs in the list are widely spread for a number of reasons across Adelaide.

Located to the inner-south of Adelaide, Colonel Light Gardens has recorded a 14.2 per cent rise in its median house price in the last 12 months, and now boasts a median house price of $1.02 million.

It is followed by Everard Park in Adelaide’s south-west with a median house price of $1 million.

Known for its beautiful properties in serene settings, Stirling leads the way in the hills with a median house price of $1.04 million.

The suburbs of Erindale, Royston Park, and Wayville all share $1.3-million medians.

Meanwhile, Joslin, in the city centre, and Leabrook, in the eastern suburb, both boast medians of $1.4 million, respectively.

According to REA Group, sellers in Adelaide have moved quickly to take advantage of peak conditions with the number of properties listed for sale spiking by almost 50 per cent month-on-month in January.



Adelaide residential rental vacancy rate

CityVacancy rateMonthly % changeVacanciesNet change
Adelaide0.4%0.1%▼819▼183▼

^Source: SQM Research - January 2022

Migration from the eastern states is putting upward pressure on rents in South Australia, with the latest figures from Australian Bureau of Statistics revealing Adelaide has a vacancy rate of just 0.4 per cent—the lowest of any capital city.

The next tightest rental markets are Canberra at 0.8 per cent and Perth at 0.9 per cent.

Adelaide’s rate is also two-and-a-half points below the national average of 3.1 per cent, with Sydney at 2.6 per cent and Melbourne at 3.2 per cent, holding the most vacant rental space. 

The number of vacant rental listings available in January compared to the same time last year has fallen by 45.2 per cent in Adelaide.

Over the course of the year, median rents have grown nearly 11 per cent in Adelaide and are now only $54 per week less than the national average.

South Australia also recorded a net interstate migration gain of 963 people in the year to the March 2021 quarter, according to government figures, although economists have attributed the shift to the pandemic making people reluctant to move interstate.

According to REIA, The current Adelaide vacancy rate represents a roughly 50 per cent drop in availability from pre-pandemic levels, which hovered between 1.2 per cent and 1.1 per cent in 2018 and 2019.


Adelaide rent prices

TypeRentMonthly % changeAnnual % change
Houses$488.40▲2.1%▲14.9%▲
Units$346.60▲1.1%▲9.4%▲

^Source: SQM Research - January 2022

Unlike other cities that suffered the brunt of the pandemic, Adelaide showed remarkable increases in property rental prices.

Adelaide remains Australia’s most affordable capital with a median dwelling rent with house rents now $488.40 after lifting by 2.1 per cent in January and $346.60 for units after a 1.1 per cent bump.

Average rent in Adelaide was the highest since 2007 for units while house rentals were at its best since 2010.

The average Adelaide rent was at its peak in 2020 with a steady increase over the past five years. 

In 2017, moderate population growth and a mellow economic climate contributed to lower demand for rental properties.

The long term rental market has strengthened with dwindling supply of dwellings and vacancy rates plummeting swiftly since April 2020. 

Ease of travel restrictions has nudged the demand for short term rental properties in the right direction.

The inner city’s situation, however, is not so rosy. Unemployment and loss of student immigration has weakened the rental property market in that part of the city.



South Australia building approvals

DwellingApprovedMonthly % change
Houses865▲-7.1%▼
All dwellings1158▲-0.3%▼

^Source: Australian Bureau of Statistics - December 2021

Although the housing boom has eased from its highs of early last year, fuelled by the HomeBuilder grant scheme introduced by the federal government during the early days of the coronavirus pandemic, momentum is still strong.

In the 12 months to the end of September, the seasonally adjusted ABS figures show there were 12,900 new houses approved in South Australia, the highest on record.

During the pandemic South Australians had prioritised spending on their homes as working from home arrangements increased the need for larger and more comfortable living and work spaces.

Across the first five months of the financial year to the end of November in SA there were 4700 new housing applications with a value of $1.35 billion.

The demand spike caused a shortage of building materials such as structural timber and steel while associated price increases put some builders under pressure.

The major hot spots for approvals and construction in the northern suburbs were Munno Para West–Angle Vale, Davoren Park and Virginia-Waterloo Corner.  

Mitchell Park, which includes previously vacant land around the Tonsley Innovation Precinct, and McLaren Vale were popular spots for new houses in the south.

Almost half of the new home building approvals outside of Greater Adelaide have come in areas within a 90-minute drive of the city such as the Fleurieu Peninsula and Barossa Valley.

The Fleurieu had 300 new home approvals in the five months to the end of November led by the towns of Victor Harbor, Yankalilla, and Goolwa-Port Elliot.

The Barossa had 100 new home approvals while Murray Bridge and Mannum added 80.



South Australia home loan lending indicators

TypeLending ($bn)Monthly % change
New loan commitments for owner occupier housing1.140.8%▲
New loan commitments for investor housing0.51-3.7%▼

^Source: Australian Bureau of Statistics - December 2021

While the number of first home buyers across Australia decreased in all states and territories by 12.6 per cent in the September quarter, South Australia recorded the largest quarterly decrease in the number of loans to first home buyers at 21.6 per cent.

The average loan to first home buyers in South Australia grew to $362,000, an increase of 2.9 per cent over the quarter and 14.1 per cent over the past year.

The average loan to all borrowers in South Australia rose by almost $10,000 to $410,000.

According to REIA, the total number of loans granted in South Australia was 7400 in the September quarter. This was a decrease of 11.7 per cent compared to the June quarter.

The number of loans to first home buyers in South Australia decreased to 2200, representing about 29 per cent of all loans.

A year ago, first home buyers made up 33.5 per cent of the South Australia market.

In terms of housing affordability, the proportion of family income needed in South Australia to meet loan repayments increased 0.3 per cent for the quarter to 30.8 per cent. This was up from 29 per cent 12 months ago.



South Australia interstate migration

StateArrivalsDeparturesNet change
Queensland7460▲6812▼648▲

^Source: Australian Bureau of Statistics - March 2021 (series paused due to Medicare data issues)

Interstate migration into South Australia, growing at its fastest rate in three decades, has remained a tailwind for housing demand.

South Australia is one of the Australian states, along with Western Australia and Tasmania, that has been largely Covid-19 free since the first lockdown in early 2020.

In the post-war era Adelaide was recognised as Australia’s third-largest city but has since been overtaken by Perth and Brisbane.

Never a rapidly growing state, South Australia’s population continues to grow slowly, now at 1.8 million people, and has turned around interstate migration with more people now moving in.

According to the latest available Australian Bureau of Statistics data, Adelaide’s population grew by 0.9 per cent during 2019-20.

Typically in South Australia, interstate migration shows a net loss: more people move out of the state than move in.

In the March 2021 quarter, South Australia recorded 7400 arrivals and 6800 departures with greater Adelaide now home to 78 per cent of the state’s total population.


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Article originally posted at: https://www.theurbandeveloper.com/articles/adelaide-housing-market-update