What’s in Store for Adelaide?

It’s fair to say that Adelaide has been flying under the radar for some time now, with investor attention fixed firmly elsewhere. But how is the market tracking? And what might be on the horizon?

Vacancy Rates

Adelaide currently boasts the tightest rental market in the country. According to recent PropTrack data, the city's vacancy rate in June 2024 was just 1.13%, despite a slight increase from the previous month. This was the lowest vacancy rate of any capital city in the country and a staggering 24% lower than Adelaide’s vacancy rate back in March 2020.

Over the past year, Adelaide’s vacancy rate has risen by 0.23 percentage points. While this increase might suggest a slight easing, it remains critically low, reflecting a chronic undersupply of rental properties. For investors, this signals a robust rental market where properties are likely to be occupied quickly, minimising periods of vacancy and maximising rental income.

Rising Prices

Adelaide's property market is not just about rental demand. Property prices in the city have also been on the rise. As of the latest reports, the median house price in metropolitan Adelaide hit $785,000, marking a new record. This represents a 12.14% increase over the past year. Suburbs such as Royal Park and Tea Tree Gully have seen particularly high price increases, with some areas experiencing growth rates of over 50%.

Key Investment Hotspots

Recent research suggests several areas in Adelaide that are poised for significant future capital growth. Tea Tree Gully, Holdfast Bay, Salisbury, Mount Barker, and the Playford council areas have been identified as the top hotspots for investment. These areas were chosen based on factors such as sales activity, buyer demand, major infrastructure projects, and rental market metrics.

Tea Tree Gully stands out due to affordability and extensive infrastructure, including schools, medical facilities, and retail hubs. The area is well-connected to major employment nodes, making it highly desirable for both owner-occupiers and investors. The neighbouring council areas of Salisbury and Playford are also noted for their manufacturing and defence industries, offering strong long-term capital growth potential.

Tourism hotspots like Mount Barker and Holdfast Bay offer attractive lifestyles with wineries in the hills and premium beaches in the west. Glenelg in Holdfast Bay is evolving quickly with new apartment developments, making it a desirable location for both young families and older generations.

Affordability and Market Dynamics

While property prices rise, affordability remains a critical concern. The average new mortgage in South Australia reached $541,775, reflecting broader national trends of increasing loan sizes. Despite rising interest rates, the demand for property in Adelaide remains strong, suggesting a resilient market.

South Australia’s substantial investment in infrastructure projects, totalling over $14 billion, is set to enhance the state's liveability and economic landscape. Major developments include hospital expansions, CBD redevelopments, and significant naval and mining projects. These initiatives are expected to bring thousands of new jobs, further driving demand for residential properties.

Outlook

Looking ahead, the market looks set to continue its trajectory of strong demand and rising prices. The combination of low vacancy rates, high rental demand, and significant capital growth makes Adelaide an attractive option for property investors. However, it is essential to consider the broader economic conditions, including interest rate movements and housing supply issues. At least for the time being, buyer competition remains relatively high, creating a more challenging environment for investors to navigate.

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