4 Jun, 2020
Adelaide is one of the fastest growing property markets in Australia and it’s not hard to see why.
Not only is it Australia’s most affordable capital city, but it’s also a bustling hub with plenty to offer – from beautiful beaches to spectacular wineries.
Whether it’s an apartment in the CBD or a stone worker’s cottage in the Adelaide Hills, there’s no shortage of excellent options to break into Adelaide’s property market.
While national housing prices have continued to drop since 2017, Adelaide has remained steady, making it an attractive place to buy an investment property.
In fact realestate.com.au crowned Adelaide the top performing capital for property price growth at the end of 2019, with two-thirds of its suburbs recording growth of 5% or more.
This growth has slowed slightly due to Coronavirus, with CBA recording a 1.5% annual change dwelling values for Adelaide in April 2020.
There is a wide range of properties to choose from, with one to suit every hip pocket or investment strategy. Best of all, the median house price in Adelaide was $542,418 as of March 2020, which is around half the price of a Sydney or Melbourne home.
Domain shows that the median house price in Adelaide is $542,418 as of March 2020. This puts the state capital on a par with Perth and Hobart and slightly ahead of Darwin.
The median unit price is $323,846, making Adelaide one of the most affordable places in the country to buy a unit second only to Darwin.
Adelaide’s property growth can best be described as slow but steady. SQM research shows a consistent year on year price rise, with growth of 2.5% across all houses over the past three years. Units performed less strongly, recording a smaller uptick in price of just 1.6% in the same time period.
The upside to this relatively modest gain is stability. While there was a small softening of the market in 2018 following the Banking Royal Commission, Adelaide didn’t suffer anywhere near the losses sustained by the eastern states. If you prefer your investments to stay stable, Adelaide might be the perfect choice for you.
If cash flow is your main aim, buying a unit in Adelaide might be your best bet. Rental yields are not only strong, they have grown steadily over time and are set to continue on that trajectory. Houses, by contrast, have stayed almost stagnant at between 3.7% and 4% rental yield over the past ten years, and are better suited to a long term capital growth strategy. As of April 2020, the rental yield is 4.5% in Adelaide and is the fourth highest in Australia.
Adelaide has performed strongly over the past couple of years, weathering the Banking Royal Commission with aplomb. 65% of Adelaide suburbs have experienced growth in their median house prices in the past 12 months, many of them with rises above 5%. This growth has slowed due to coronavirus. According to data from Corelogic, average prices in Adelaide have dropped by approximately $41,000 and are predicted to decrease by 8.1% over the next year.
Historically, Adelaide’s population growth has lagged behind the larger cities. However, successive government initiatives have been introduced to attract more migrants and foreign students to the city. In the past, this has boosted the economy, strengthen property prices and lower the median age to better balance the demographic spread.
Those initiatives seem to be turning the tide. Population growth in 2019 was 0.9%, the best result since 2014 and the latest in a four-year run of increased growth.
Greater Adelaide recorded a population of 1.33 million in the last Census, spread over a total area of 3,257 square kilometres. Around three quarters of all South Australians live in the Adelaide metropolitan area, with a population of around 23,000 clustered in the 15.57 square kilometres that make up the City of Adelaide.
Adelaide has the second highest median age of all Australian cities after Hobart and a birth rate of 1.67: slightly below replacement rates. Migration is low compared to the east coast. Once a popular destination for British, Greek and Italian migrants, these populations are now ageing in place. The ABC reports that new migrants are more likely to come from Asia, especially China and India, but that these arrivals are still a very small percentage of the population as a whole. As well as this, the number of migrants and foreign students coming into Adelaide is expected to drop significantly due to coronavirus travel restrictions.
Adelaide is unique amongst Australian cities for its careful layout and design. Conceptualised by Colonel Light, the CBD is laid out in grid form and bounded by the wide green spaces of the Adelaide Parklands.
Light’s Vision, as it is known, allowed for five large public spaces within the CBD. Victoria Square stands in the centre, and plays host to temporary festivals, public events and the many workers who find a restful lunch spot in the shade of the historic buildings that surround the square.
Hindmarsh, Light, Hurtle and Whitmore Squares each stand in the centre of Adelaide’s four quadrants. Along with the fiercely guarded Parklands, the layout means that you’re never far from a green and peaceful place to rest.
Adelaide’s cultural scene is second to none. During the summer festival season, the streets come alive to the pulse of the Adelaide Fringe Festival, second only to Edinburgh in size and prestige. WOMAdelaide is another huge drawcard, while the Clipsal 500 keeps motorheads happy.
There’s plenty to do all year round with a thriving food and wine industry. Adelaide has long been known for its fine wine regions, juicy olives and artisan cheese, plus smoked meat and other small goods. The Adelaide Festival Centre plays host to touring musicals, plays and opera, with splendid exhibitions in the Art Gallery of SA.
Major infrastructure projects mean high demand in local property markets. Savvy property investors know that infrastructure developments in the pipeline often mean high capital growth when those developments come to fruition.
In South Australia, the redevelopment of the Queen Elizabeth Hospital has brought jobs to the state and materially improved the health care system. There are some major projects underway to improve road linkages to outer suburbs, including Gawler in the north and the Flinders Link project in the south. Work is also underway to preserve Adelaide as a green and pleasant place to live, with bikeways and greenways under construction in the CBD.
The Greater Adelaide region is the ‘engine’ that drives the South Australian economy. There has been substantial government investment in clean energy, education and renewables. South Australia also has a strong wine and food industry, with several famous wine regions spanning from the Barossa Valley to McLaren Vale and the Coonawarra region.
After years of low economic growth, Adelaide has surged in recent times. SGS Economics & Planning reports that Adelaide has experienced a boom over the past three years. In 2018-19 Adelaide grew by 3.2 per cent – significantly higher than the national growth rate of 1.9 per cent.
According to the ABC, South Australia is predicted to play a key role in reviving Australia’s economy after the coronavirus pandemic. This is because South Australia’s economy isn’t reliant on industries that have been heavily impacted by coronavirus. As well as this, the low number of cases has meant that Adelaide’s tourism industry is expected to be more resilient than other states.
Available data shows Adelaide’s housing prices have outpaced the annual inflation by about 2.5 percentage points per year over the past five years. The housing market is relatively stable in Adelaide which has also meant that Adelaide is expected to make a strong recovery from the impacts coronavirus has had on the market.
Adelaide itself is also growing, with small but appreciable gains in population for the last four years. The population grew by 0.9% in 2019.
In 2019-20, 215 residential buildings have been approved to be built in the Adelaide CBD. This is a prime indicator of residential demand and economic activity, and speaks well of investor confidence.
Adelaide property has a lot to offer investors. It’s slow, steady and reliable. While rental yields and capital growth gains are more modest than on the east coast, they’re also far less volatile. Adelaide has shown itself to be capable of withstanding market shocks again and again, making property investment here as safe as houses.
It’s also very affordable. Adelaide offers the second cheapest units in the country, and the fourth cheapest houses. That means it’s ideal if you want to start a property portfolio or just get your foot on the property ladder in the first place.
As with any financial decision, your personal circumstances will dictate what’s best for you. Have a chat to an eChoice mortgage broker to discuss your goals and options before making any final decisions.
Adelaide is a city full of character and charm. Each of its suburbs has something unique to offer and a style all its own. Whether you prefer the rural idyll of the Adelaide Hills, the cosmopolitan inner east or the grit and vibrancy of the western suburbs, there’s something for everyone here.
Cafes, museums and the world renowned Adelaide Central Markets make the Adelaide CBD an enticing lifestyle choice. It’s an extremely walkable city, with free city buses and trams to help you get around. For investors, an Adelaide CBD house or apartment is the obvious choice. Proximity to Adelaide University and UniSA ensures high rental demand from students, as well as the many young urban professionals who want to live, work and play in one location.
This city fringe location is perfectly poised between the city, airport and the sea. This is an area in extremely high demand for both buyers and tenants given its convenience and charm. Business travellers and holidaymakers are also likely to choose it as a destination, making it a great option if you want to profit from the short term rental market. Keswick is walking distance from the CBD and the popular Adelaide Showgrounds. Catch the iconic Glenelg tram down to the beachfront for a day on the sand. The airport is a short drive away.
Parkside combines historic charm with modern luxury to showcase some of Adelaide’s best homes. The streets are leafy and quiet, with elegant mid-sized Victorian villas and high quality subdivisions in abundance. Walking distance to the CBD, and with prestigious schools and boutique shopping at your fingertips, Parkside is known for its amazing lifestyle. It’s no wonder that this blue chip location has recorded strong capital growth and returns year on year.
Adelaide has some of Australia’s best beaches, and none are more popular than bustling Glenelg. This vibrant spot boasts cafes, boutique shopping and the upscale Holdfast Shores restaurant strip, as well as good old family fun on the sand. Beloved by families, busy professionals and seachangers alike, Glenelg has a mix of high density apartment buildings, quiet groups of units and family houses to choose from. In 2020, realestate.com.au reported that Glenelg median property prices ranged from $975,000 for houses to $460,000 for units. Houses in Glenelg rent out for $525 per week with an gross rental yield of 2.96% and units rent for $400 per week with a gross rental yield of 4.71%. Based on five years of sales, Glenelg has seen an average growth rate of 1.4% for houses and 2.17% for units.
Henley Beach is Glenelg’s stylish younger sibling, with hip cafes and open air music performances on its rolling lawns. Huge beachfront homes with tiered glass balconies rub shoulders with character-laden retirement units that hail back to the days when this lovely suburb was still undiscovered.
One of Adelaide’s grand dames, Unley encapsulates classic Adelaide at its best. Stone-fronted Victorian villas are common, most with an upscale modern extension to make them even more enticing. This is a tightly-held space, with established South Australian families often holding onto the family home for several generations.
If Unley is the grand dame, Norwood is the up-and-coming young Queen. A mixture of contemporary townhouses, historic stone cottages and quiet units cluster in quiet leafy streets behind vibrant Norwood Parade. Cinemas, theatres, restaurants and shops offer a thriving cosmopolitan lifestyle day and night, with something for everyone to enjoy.
Semaphore is a little quieter than the hot spots of Glenelg and Henley Beach, but what it lacks in crowds it makes up for in charm. Relax by the seaside in one of the excellent local cafes or admire a sunset along the uninterrupted coastline.
A little bit of industrial grit has turned Brompton into an Adelaide pearl. Once home to factories and warehouses, Brompton is now the place to live for hip young Adelaide couples. Edgy new cafes and organic shops are springing up all the time, and you’re just a stone’s throw from live music at the iconic Governor Hindmarsh. Spend Saturday at Plant 4 Bowden where music, plants, local art and the best coffee around all mingle in an exciting new warehouse space.
Prospect has been a solid performer for many years, and no wonder. Just one suburb out from the mansions of North Adelaide, this is the ideal spot to raise a family. Prospect is heavily weighted towards family homes, with Californian bungalows and Victorian villas sitting alongside a few medium-density developments of single-story units. It’s popular with the Airbnb crowd as well as long term tenants and owner-occupiers thanks to its cafe lifestyle and proximity to the CBD.
Rosslyn Park, in Adelaide’s leafy east, has the lowest crime rate of any suburb with just 0.96 incidents per 100 residents as of January 2020. Rosslyn Park is a family area, with established couples, older families and elderly residents making up the population.
Median house prices are high at $847,000 and houses rent for $580 per week. There are no units available to buy in Rosslyn Park, due to restrictions on housing density and low turnover.
The most expensive suburbs in Adelaide are, unsurprisingly, those on the city fringe. Medindie, North Adelaide, Malvern, Toorak Gardens and Tusmore all score highly. However, Unley Park takes the crown. With a median house price of $1,390,000, the suburb costs around 2.5 times the average house price across greater Adelaide.
Houses in Unley Park rent out for $520 per week with an annual rental yield of 1.9% and units rent for $330 per week with a rental yield of 2.7%. Based on five years of sales, Unley Park has seen a compound growth rate of 5.6% for houses and 10.4% for units, both of which are significantly higher than the state average.
The cheaper property prices are the main lever, though. You’ll pay substantially less for your mortgage if you buy a median house in Adelaide than you will for one in Brisbane, and renters can also benefit from more affordable housing.
Everyone’s budget is different. How much you spend will depend on where you live, how many dependents you have, whether you have a car and a heap of other factors. As a rough guide, though, the cost of living index in Adelaide is 13.65% lower than in Sydney, while rent is almost half the price at 48.82% cheaper. Across all of Australia, the cost of living index has increased by 0.3% as the coronavirus pandemic has seen a higher demand of goods and a decrease in discounting.
Ideally, you’ll want to have saved 20% of the purchase price as a deposit. If you buy a median house at $540,000, you’ll need a deposit of $108,000 plus stamp duty and costs. If that sounds like an unachievable number, don’t worry. You can buy a house in South Australia with as little as 5% of the purchase price as the deposit.
However, if you buy with a deposit less than 20%, you will need to take out Lenders’ Mortgage Insurance (LMI). LMI protects your lender in case you default on your mortgage. The cost of LMI varies depending on how much deposit you pay. The LMI on a 15% deposit will be lower than the LMI on a 5% deposit, because the risk is lower to the lender.
Check with an eChoice mortgage broker to explore your home loan options. You may be surprised at how many there are out there. At eChoice, we have some of the most experienced mortgage brokers in Adelaide who can help you find the right home loan for you.
This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.
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Words by Emma Norris
eChoice has some of the most experienced mortgage brokers in Adelaide. With access to hundreds of home loan products and an eChoice broker is ready to help find the right option for you.