SouthAustraliaProperty Report – January 2014

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South Australia – Property ReportJanuary 2014

National Overview

This quarter we look around the nation to identify affordable properties with the potential to deliver healthy long term gains suitable for first home buyers and also investors. If there is one word that could sum up the key driver for growth, it would have to be ‘infrastructure’. New road / rail links are bringing affordable outer suburbs closer to city centres and employment hubs. New hospitals or tourism precincts are creating jobs. These are valuable factors that will underpin long term capital gains.

ALL ABOARD – NEW RAIL LINKS LET SUBURBS REACH FULL POTENTIALThe inner Sydney property market looks set to be transformed by a number of new light rail systems. Key areas to benefit include the inner west’s Dulwich Hill and Kingsford in the east.

The construction of South West Rail Link is likely to underpin growth in the first home buyer belt of Sydney’s south west, with suburbs like Elizabeth Hills, Gregory Hills and Oran Park well placed to reap the rewards.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth. The connection is earmarked to run from Dutton Park in the south to Victoria Park in the north, though it’s worth stressing the project is only a proposal at this stage.

ROAD LINKS BRING OUTER SUBURBS CLOSER INThe duplication of Adelaide’s Southern Express Way – due for completion in mid-2014, will vastly improve commuter access to Adelaide’s south. Suburbs like Seaford, Seaford Rise and Port Noarlunga South all offer significant lifestyle benefits and the new road link should bring capital growth to the region.

NEW COMMUNITY INFRASTRUCTURE CREATES OPPORTUNITIESMelbourne’s Broadmeadows is a classic example of an uncut gem for investors. House prices start at the low $350,000s, yet the suburb is located just 16 kilometres north of the CBD. A major investment in community facilities is expected to enhance the area’s appeal.

For investors with a speculative leaning, suburbs with proximity to Brisbane’s proposed Underground Bus and Train (UBAT) link could offer long term capital growth.

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South Australia – Property ReportJanuary 2014

For investors with a five year timeframe, the additional employment generated by the Queensland’s Sunshine Coast University Hospital (due for completion in 2016) should support property values from Caloundra to Maroochydore.

CONSIDER NEIGHBOURING AREASFaced with affordability challenges, it can pay to look at areas where neighbouring suburbs have experienced strong price growth. This is especially true in the Perth suburbs of Parkwood and Lynwood, which remain priced below $500,000 while adjacent suburbs are commanding price tags in excess of $650,000. When suburbs share the same infrastructure facilities, notably transport links, there’s a good chance that price growth will ripple outwards.

A FINANCIAL HELPING HANDIn a number of locations, first home buyers are being encouraged to consider new builds with the enticement of additional state government support. This is especially the case in Tasmania where the recently inflated First Home Builder is seeing buyer interest grow in suburbs along Hobart’s eastern shore in particular Old Beach, Howrah, Tranmere and Oakdowns.

Brendon HulcombeCEO - HERRON TODD WHITE

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South Australia – Property ReportJanuary 2014

South Australia

Like many areas of Australia, the residential property market in South Australia is experiencing intense competition between first home buyers and investors. This is especially the case in the $200,000 to $450,000 price bracket – and more so around the established suburbs and near-city locations of Adelaide.AdelaideOPPORTUNITIES FOR FIRST HOME BUYERSFirst home buyers in Adelaide could have an edge over investors when it comes to new constructions thanks to the availability of government grants.

The current First Home Owner Grant (FHOG) is worth $15,000 for new constructions valued up to $575,000 compared to $5,000 for first home buyers purchasing existing dwellings. The FHOG for established homes will end on 30 June 2014.

For first home buyers the southern suburbs of Seaford, Seaford Rise, Seaford Meadows and Port Noarlunga South are worth a look. These areas have largely been overlooked by investors owing to extended travel time to Adelaide’s CBD, which has impacted tenant demand. However public transport and vehicle access to the area will improve significantly following completion of several major infrastructure projects.

These works include the extension of the existing rail line and construction of a station and bus interchange at Seaford and a station at Seaford Meadows. Both have ‘park and ride’ facilities, which will accommodate 450 and 550 cars respectively. All major works are completed and the service is expected to come on line very soon.

The duplication of the Southern Express Way – due for completion in mid-2014, will further expand commuter access between the CBD and Adelaide’s south.

The area south of Adelaide offers plenty of quality lifestyle features that will appeal to first home buyers. The southern beaches are nearby, there are plenty of local community and private services and the McLaren Vale winery region is close by. A number of established commercial centres operate in the area, in particular Noarlunga. Seaford Central Shopping Centre provides local shopping and Seaford Meadows Shopping Centre is due for completion in April 2014.

The area south of Adelaide offers plenty of quality lifestyle features that will appeal to first home buyers.

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South Australia – Property ReportJanuary 2014

These amenities plus improved transport options should underpin capital growth in the area. At present the south Adelaide region is affordable, with modern 3- and 4-bedroom homes priced at around $300,000 to $400,000. Lot sizes vary from 300 to 400 square metres.

Ingle Farm is another Adelaide suburb with appeal for first home buyers. It is cheaper than many surrounding areas with 3-bedroom homes priced from $250,000 to 300,000. These tend to be older dwellings on lots of about 600 square metres giving first home buyers the opportunity to add value through renovations or extensions. Ingle Farm is located near the new Roma Mitchell Secondary College and the suburb enjoys good transport links.

To the west of Adelaide’s CBD, Flinders Park is just 7 kilometres from the city centre. The suburb is close to the airport though it is not affected by the flight path. The beach is nearby and older style 3-bedroom homes are available for around $400,000 to $500,000. The generous lot sizes – typically 700 square metres, allow the option of extending.

Port Adelaide and Ethelton may also be of interest to first home buyers. This area is slowly changing from an industrial hub to a residential area and at present it offers a waterside location without the typical waterfront price tag. The recently upgraded Westfield West Lakes retail centre is close by, and the new South Road Super Way will divert a lot of heavy vehicle traffic away from residential areas. There is an interesting mix of dwellings available, with 2- to 3-bedroom homes priced from $300,000 to $500,000.

OPPORTUNITIES FOR INVESTORSThe Adelaide residential property market has historically been a very stable market, providing solid capital gains over the long term. Vacancy rates have remained at acceptable levels – generally below 3% – over the past ten years and are stable at present.

At this stage we believe the range of properties available across the metropolitan area all have the potential to provide healthy investment returns over the long term. The median price in Adelaide is just under $400,000 though there is a large range of properties available across most suburbs with a price tag from $200,000 upwards.

Investors should take note that the outer northern suburbs are beginning to show signs of an oversupply of properties with the potential to increase vacancy rates. Similarly, there is a possibility of an oversupply developing among inner city high rise apartments and other multi storey developments, many of which are currently being sold off the plan.

Properties close to the city generally involve a higher price tag though with potentially better long term capital gains than suburban properties. The inner suburbs remain highly popular with tenants and properties close to the CBD are always in demand. Both houses and units in Adelaide provide worthwhile options for investors though our observation is that units are tending to appreciate at a slower rate than detached housing.

As an investor in Adelaide, locations further away from the city centre offer sound opportunities – and each of the suburbs noted for first home buyers, are appropriate for investors also.

At this stage we believe the range of properties available across the metropolitan area all have the potential to provide healthy investment returns over the long term.

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