South Australian property prices reach bottom but modest growth projected

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on January 15, 2020
South Australian property prices reach bottom but modest growth projected

Photo by Phill Graaf on Unsplash

Adelaide's property price slide appears to have bottomed out as buyer confidence and auction clearance rates rise across the state, according to research.

The latest RiskWise Property Research Risks & Opportunities Report shows housing finance in South Australia is showing signs of improvement with an increase of 8.6% since February 2019 after a reduction of 6.6% relative to August 2018. 

RiskWise CEO Doron Peleg said despite monetary policy changes and relaxed lending restrictions, South Australia's low population growth and unemployment well above the national rate of 5.2% meant the property market was suffering.

“While the labour market has improved in the past couple of years, the effective unemployment rate in South Australia is still above 9% and the employment market is still soft,” Mr Peleg said.

“This has a strong connection with low population growth (only 0.8% p.a) and, therefore, low demand for dwellings.

“While serviceability measures have improved due to the RBA’s interest rate cuts (with another expected sometime in the new year), the relatively high unemployment rate increases the risk of credit defaults.

“That, combined with some properties that suffer from low demand, require special attention in relation to credit provisioning.”

Adelaide dwelling values have experienced a soft rebound of 1.4% in the quarter up to the end of December, but are still down 0.2% for the year. 

The South Australian capital hasn't experienced the strong rebound most capitals have, with Sydney and Melbourne values up 6.2% and 6.1% respectively for the quarter. 

Mr Peleg said that although dwelling values have reached their bottom, any sort of economic growth will take a considerable amount of time to eventuate.

“However, while South Australia enjoys high levels of public and private expenditure, in the short term, the economic growth is projected to remain relatively low, around the 2% mark.

“Long-term economic growth will be a slow process and with a soft labour market no significant changes to demand are expected in the short to medium term, with less popular areas experiencing modest growth only.”

Strong growth hard to come by across South Australia

Mr Peleg said despite low building approvals, demand for houses was projected to remain subdued due to moderate capital growth forecast. 

However, this growth rate was projected to vary greatly across the state with houses in areas close to the Adelaide CBD, such as Adelaide Central and Hills, likely to deliver better growth. 

Houses in areas that don't enjoy good growth drivers still carry a risk of delivering poor or negative capital growth. 

For example, according to CoreLogic, the median house price in the Barossa-Yorke-Mid North area declined by 0.2% in the past 12 months.

Mr Peleg said while South Australia offered healthy rental returns for both houses and units, demand for units among owner-occupiers, despite good affordability, was low.

“In addition, units in some suburbs are subject to voluntary lending restrictions by the major lenders, such as lower loan-to-value ratio (i.e. higher deposit) due to oversupply.

“Units are not considered a popular dwelling option among families especially off-the-plan units in high rises, and these carry the highest level of risk.

"Overall, units in South Australia are likely to deliver poor capital growth.”

Adelaide Central and Hills has the highest rate of oversupply in South Australia with 2696 units in the pipeline, an 8.2% increase to the current stock. 

As a result, there has been a price decline of 0.3% in the past year. 

The table below displays some of the lowest-interest variable rate home loans currently available in Australia for owner-occupiers making principal and interest repayments.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
More details
AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 18, 2022. View disclaimer.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Alex joined Savings.com.au as a finance journalist in 2019. He enjoys covering in-depth economical releases and breaking down how they might affect the everyday punter. He is passionate about providing Australians with the information and tools needed to make them financially stable for their futures.

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