Property market update: Adelaide’s going strong plus auctions decline
While prices in Melbourne and Sydney are getting everyone’s attention, it’s the City of Churches you should be looking at for steady growth.
With her weekly look at what you need to know in property, realestate.com.au chief economist Nerida Conisbee also looks at which holiday hotspots are a better buy.
Adelaide surprises with steady growth
If you want steady growth and few surprises, Adelaide is your market. It has declined a tiny bit from its peak but nothing compared to what happened in Melbourne and Sydney.
Like most of Australia, buyers are flooding in to premium areas in Adelaide at the moment. And these buyers are likely to include a lot of investors.
We continue to see high levels of search coming out of Melbourne and Sydney looking at Adelaide’s premium suburbs. What this has led to is a lopsided rental market.
While buyers want premium, we are seeing high views per listing from renters for Adelaide’s more affordable suburbs.
The most in-demand suburbs from renters right now are Edwardstown, Morphett Vale and Andrews Farm.
The other factor likely driving this is the growth of Adelaide’s manufacturing sector – jobs growth across a wide range of incomes is creating demand at all rental price points.
Auction numbers are down
Clearance rates may be pretty good right now but the real news is how bad auction numbers are.
Auctions taking place over the weekend in Melbourne and Sydney were over 70% down from the same time last year.
Even accounting for the fact that not all auctions would have been reported at the time of writing this, numbers are likely to have more than halved.
We can see from search that buyers are back and concentrating on premium suburbs, which are where the majority of auctions are taking place. Low stock, high search is starting to lead to price growth.
Sunshine beats snow for demand in rural areas
Having just returned from a trip to the snow, I thought I would take a look at buyer demand for Australian Alpine regions. Data is pretty light on, primarily because transaction numbers are so low.
None of the NSW ski resorts recorded enough transactions to be able to give any reliable data, for example. Median price data is sketchy across the board.
Comparing buyer demand in Victorian Alpine regions to Victorian beachside locations, the beachside regions are far more popular. Portsea, for example, sees over 1,700 views per listing.
This compares to Mount Buller, the most popular Alpine region with 419 views per listing.
The caveat, however, is that when you compare beachside locations a similar distance from the Melbourne CBD to the Alpine regions, the views per listing become a lot more comparable.
Lakes Entrance and Apollo Bay see more than any of the Alpine regions but it isn’t much higher. It seems like Victorians like the idea of a beach house more, provided it is pretty close to Melbourne.
Time to take another look at industrial property
For investors, industrial property is a real growth area, as it is most likely to benefit from technological change. This is already happening as more consumers turn to online retailers; shopping centres are now very unpopular.
Industrial property will also benefit from future developments in farming, with more fruit and vegetables grown hydroponically; greater production of alternative meat products; and used to store driverless cars.
Here’s a look at other important developments in this growth area:
- For the first time, Scentre Group (the Australian arm of Westfield) has dropped from being the biggest ASX listed property company to the second listed. It has been overtaken by Goodman (biggest industrial owner). In the US, Prologis (industrial) and Simon Property Group (retail) are running neck and neck to be the largest listed property companies
- In a report prepared by CBRE earlier this year, industrial property has taken over from office spaces as the preferred commercial property type by Australian investors
- According to AMP, industrial land values are now at record highs
- According to UBS, there is a worldwide shortage of industrial space because of the growth of online retailing
- Buyers continue to become more sophisticated and are moving from being dominated by owner-occupiers and those looking for high yield
- According to realcommercial.com.au, the top location for buyers is currently Campbellfield in Melbourne’s north. For tenants, it is Alexandria in Sydney’s south – although this is likely being driven by demand for a lot of small volume warehouses and the diversification of this area into an office/warehousing precinct. Number two for tenants is Campbellfield.