Australian Financial Review – 17 November, 2015
By Simon Evans
Exasperated by the sharp run-up in residential property prices in Sydney and Melbourne, some buyers are turning their sights to the inner ring of suburbs up to 10km from the Adelaide CBD.
The sweet spot is the price bracket from $450,000 to $800,000 and the wave of “interstaters” as local experts call them, are the most active they hve been since 2010.
They are prepared to accept that capital growth over time is likely to be more subdued than the eastern states high-flyers which are now experiencing a levelling off, but are enticed by average gross rental yields of 4.1 per cent for houses, and 4.7 per cent for units.
That compares with yields of 2.9 per cent in Melbourne and 3.1 per cent in Sydney as outlined by CoreLogic RPData figures earlier this week.
Alex Ouwens, the president of the Real Estate Institute of South Australia, says the interest from interstate buyers is the highest he’s seen in the past five years.
“We are certainly seeing more interstaters than I have seen for the past five years,” he says. “They’re saying that in some ways slow and steady wins the race”.
It’s a complex decision for investors who are crunching the numbers on the higher interest rates they are being charged as property investors by the banks compared with owner occupiers, and for higher deposit demands.
The amount they need to shell out to secure a property to put into the investment portfolio is far lower in Adelaide than it is in Sydney or Melbourne.
REISA figures for the September quarter of 2015 showed the median house price in Adelaide was $430,000, up 4.62 per cent from the same time in 2014. Sydney’s median house price has hit $800,000.
Mr Ouwens, who is a principal of real estate firm Ouwens Casserly says another element feeding into the dynamics is that Adelaide property owners are holding onto their properties for longer and that’s one of the factors behind lower stock levels on the market.
REISA figures showed there were 3,484 sales in the September quarter of 2015, down from 4,012 in the same three months in 2014.
Mr Ouwens says the average ownership period is now around 10 years for a house in Adelaide, and this compares with around 6.5 years a decade ago. He says high stamp duty costs are a likely influence.
Jock Gilbert, the principal of Jock Gilbert Real Estate which specialises in Adelaide’s leafy eastern suburbs which have a high proportion of historic bluestone and sandstone symmetrical cottages, says the level of inquiry has been rising from Sydney investors.
“There’s a lot more inquiries from Sydney that we’ve been getting in recent weeks,” Mr Gilbert says.
“Adelaide does tend to lag the eastern states by a couple of years,” Mr Gilbert says. This cycle had played out again and again over the last few decades.
He says those downsizing from large $2 million-plus properties with a swimming pool still need to spend $1.2 million-plus to buy a well-appointed courtyard home or apartment on a smaller block in the more affluent suburbs of North Adelaide, Walkerville, Malvern or Toorak Gardens.
REISA figures showed that the inner-city eastern suburb of Norwood was the strongest performer in the Adelaide metropolitan area in the September quarter with a median house price of $1.25 million, up 60.3 per cent on the previous year.