Bricks and mortar is magnet for investors

Aug 2002

Adelaide's median house price rose for the seventh consecutive quarter to set yet another record for the metropolitan median finishing at $170,300.

This was achieved with a slight increase in sales volumes for the quarter, from 5,748 in June 2001 to 5,779 in 2002.

The State followed the metropolitan trend to finish the quarter at $155,600 - arise of 14.50 per cent over the year.

June's result is welcome news, especially as the median price rise comes on the back of two recent interest rate hikes and increasing analyst speculation of a downturn in the real estate market.

Real Estate Institute of South Australia (REISA) President Barrie Magain said there was an increasing trend back towards the 'safe haven' of real estate investment as investors weighed up recent overseas news of inflated corporate earnings and company closures.

"We've all been hearing about Enron, Xerox and Worldcom, but the uncertainty is also being felt closer to home. In the past 18 months we've had the HIH debacle, and the collapse of one-Tel and Ansett," Mr Magain said.

"Given the pounding some superannuation sharemarket funds have taken in the past year due to various world events, many investors are wisely balancing their superannuation portfolio with investment in real estate."

Anecdotal evidence continues to support the view that levels of available stock for sale in South Australia are at their lowest in recent memory. REISA members report high numbers of appraisals being undertaken that are not necessarily resulting in listings and buyer enquiry remains high.

Mr Magain highlighted the performance of units as a sector of the market showing strong growth. The median price for a home unit in Adelaide is now $129,500 up 14.70 per cent in the past 12 months.

"Units provide good return at a relatively low cost and they are a particularly attractive form of investment for Mums and Dads, or young singles who want to enter the property market," Mr Magain said.

"These prices are being attained for very standard brick units. A year and a half ago these were selling at around $80,000, now they're at the $130,000 mark and owners haven't had to spend anything on improving them to get this price.

"Investors are coming back into the market in force and there also appear to be a growing number of interstate investors buying rental investment properties here simply because of the greater affordability Adelaide offers when compared to Melbourne or Sydney."

The June quarter figures reinforce the ripple effect that is being experienced throughout the metropolitan area. Some of the greatest rises in medians when viewed over the year have occurred in the outskirts in suburbs such as Salisbury East (13.84%), Paralowie (18.84%), Morphett Vale (27.83%) and Seaford Rise (13.84%).

"The rises in these lower-priced markets are really pulling the entire State median higher," Mr Magain said.

"In many ways the southern areas moved first, but now we're seeing the same increases in the northern suburbs.

"The other big obvious trend is the continuing results of coastal suburbs and towns as purchasers seek a lifestyle change and a move to the coast."

Mr Magain said the recent announcement by Holden to introduce a new shift at the factory would have a positive effect on employment in the North, which should help maintain the median price strength in those suburbs.

Looking ahead, the effect of the reduction in the First Home Buyer's Grant from $10,000 to $7,000 is expected to maintain upward pressure on the price of established homes to help maintain the market's strength, though the winter months are traditionally the slowest time of year for house sales.

The June quarter statistics reveal some surprises in regional South Australia. While coastal towns Port Lincoln and Victor Harbor - standout suburbs for the past few quarters - continued their upward trends, it was Murray Bridge that provided one of the highest rises.

The median house price in Murray Bridge rose 26.40 per cent from $89,000 in June 2001, to $112,500 in June 2002.

Factors assisting the price growth in Murray Bridge were employment opportunities in the town, coupled with the impact of the new freeway in reducing travel times into Adelaide.

After breaking the $150,000 barrier in March 2002, the Mount Barker median continued its upward surge reaching $160,400 an increase of 6.93% over the quarter and 13.36% over the year.

Port Augusta, Port Pirie and Whyalla also recorded solid gains with many first home buyers contributing to market strength in these towns. Port Augusta rose 20.66% over the year, Port Pirie 15.89% and Whyalla recorded an 11.69% rise over the twelve month period.

The South East had mixed results. Both sales volumes and the median price was down in Mount Gambier over the quarter but when viewed over a 12-month period Mount Gambier prices are still 3.27 per cent higher at $126,500.

Naracoorte was significantly higher over the quarter, up 13.33 per cent to $85,000, but this was down 5.56 per cent from the corresponding period in 2001 when the median house price sat at $90,000.