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South Australian Property Market Update – March 2015

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In today’s show, together with property lecturer and author Peter Koulizos, we look at the property market in South Australia. We talk about the areas showing some really good potential and the areas we should avoid.

 

Transcript:

Kevin:  As I said at the start of the show, today we’ll be taking you all around Australia. We’ll look at each of the individual states to tell you what is happening there; we’ll look at development and infrastructure. Of each of our guests, we are going to pose the question, “If you had $500,000 to spend, where would you spend it in that location, whether that’s a state or in the capital city?”

We’re going to start off by heading straight to South Australia. I’ll be talking to property lecturer and author Peter Koulizos. Peter, tell me about the South Australian market. What are you hearing right now?

Peter:  I just had a look at some recent RP Data stats, Kevin, and I know a month is not a long time in property, but just the last month, Adelaide was the second best performing capital city behind Sydney and it also had the second highest clearance rate behind Sydney. Sydney is out-performing the country at the moment and has been for the last two years.

Some of the positives for South Australia include the fact that the Aussie dollar is dropping. It’s great for three of our biggest exports, which are manufacturing, agriculture and international students. On the horizon, we also have Holden shutting down, which I think we’re going to talk about later on in the interview.

Here in Adelaide, we are quietly confident. We’re not waving the flags because the stats don’t show that we’re going terrifically. The drop in the Aussie dollar is certainly going to help states like ours and Victoria, which rely heavily on the manufacturing industry.

Kevin:  Of course, South Australia has come in for some pretty bad press in the last 12 months to two years over things, like you mentioned the Holden closure. Car manufacturing has been the backbone of that area for quite some time. Is there anything on the horizon that looks like it might replace that?

Peter:  We have a lot of major infrastructure projects happening in Adelaide, in particular. I’ve been born and bred in South Australia, and I have never seen so much infrastructure going on as I have seen in the last few years.

As far as road infrastructure is concerned, we have what they’re calling the Torrens-to-Torrens Upgrade, which is from South Road, which is our major north-south arterial road between the River Torrens and Torrens Road, is getting a huge upgrade.

Further south around Darlington, there is a big road upgrade there, as well. That is coming on the heels of the Melbourne Expressway, which was finished a little while ago, and also the Southern Expressway which finished its duplication just a matter of months ago. A lot of jobs involved in that.

Kevin:  Those infrastructure developments you talk about, is that opening up more land for the area?

Peter:  No, because that is happening in already existing metropolitan areas. One of the great things is the fact that the infrastructure improving within the metropolitan area makes those particular suburbs around it more popular.

Whereas if you have, for example, the Northern and Southern Expressway, which do lead to the edge of the metropolitan area, because there is so much land available there and you can have a huge supply of houses, it doesn’t do a lot for prices.

But if you improve the infrastructure within an established suburb – because you really can’t build too many more houses within that suburb – its supply is relatively limited and even if demand stays the same, prices do go up.

That is certainly a very positive thing for those suburbs, in particular around the Torrens-to-Torrens Upgrade.

Kevin:  What are some of the areas that you think are showing some really good potential, and why?

Peter:  Suburbs that I would look at include Torrensville, Thebarton, and Mile End. They will be positively affected by the Torrens Upgrade. More importantly, those three suburbs that I mentioned are one, two, or three kilometres from the CBD, and there is a lot of gentrification occurring.

If I can give some interstate examples, it is like the West End in Brisbane. The West End in Brisbane was for a long time, a down-and-out area, but for many reasons – including gentrification of the area – the area is now highly sought after, just like Richmond and Yarraville in Melbourne or Balmain and Paddington in Sydney.

There is a lot of gentrification happening in the inner suburbs of our Australian capital cities, and it is certainly happening in Torrensville, Thebarton, and Mile End. Because they are so close to town, they are also very attractive to the international students because half of their university campuses are in the CBD, and the largest type campus in South Australia is also in the CBD.

Kevin:  Balance that up now. Are there some areas we should avoid, Peter?

Peter:  I think I alluded to it earlier. The fact that Holden is going to close its manufacturing plant is going to impact on those northern suburbs. Holden is centred around a suburb called Elizabeth. A lot of people may have heard of Elizabeth or Salisbury because they are the cheaper suburbs because they are such a long way from the city. But it won’t be the end of the world.

In South Australia going back many years, we’ve had Chrysler shut down their plant; it wasn’t the end of the world for Adelaide or South Australia. Even more recently, we had Mitsubishi shut down their plant, and it wasn’t the end of the world for Adelaide or South Australia.

Yes, it will have an impact. It won’t be too severe, but for the next few years, I would probably ask for people who are listening to your show to keep that in mind. It’s not just the people working in Holden, but it’s all those other businesses around the area that supply stuff to Holden; they won’t be needing as many workers either.

If there is not as much work in that particular area, it’s going to slow demand for property in that area, which means property prices will slow down, and you might even find rents dropping a little bit.

Kevin:  Peter, thank you very much. We are out of time, but I appreciate you giving us that great snapshot of South Australia.

Thank you very much for your time.

Peter:  My pleasure. Thank you, Kevin.

 

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