South Australia Property Market Outlook

Russell Burton, Principal, First National Real Estate Burton Groves and South Australian Chair expects the South Australia property market to strengthen in 2011.

“House, land and apartment/strata property prices are expected to increase by up to 5 per cent as a result of ongoing strong demand and increasing stock levels, underpinned by a reasonably strong economy,” Mr Burton said in the 2011 First National Property Market Outlook released this week.

“Assistance programs by major builders together with First Homebuyers Bonus scheme is also adding stimulus to construction and land sales.”

According to Mr Burton, vacancy rates are expected to trend downwards in 2011, although may increase marginally by up to 1 per cent in the first half of the year. Weekly rentals are expected to trend upwards as a result of increasing demand due to a booming resources sector and an ongoing lack of investor presence in the market.

“Movements in weekly rentals will be by up to 5 per cent in the main as investors slowly realise the long term potential and bargains on offer,” Mr Burton said.

“Investor activity is expected to increase in the region of between 5 and 10 per cent, as confidence in the market continues to grow.

“Increased mining activity will improve economic and market conditions such as increased job opportunities, stronger demand for housing wealth creation and investment in property. This should see further investment in transport infrastructure for export and provide stimulus in mining and Port regions throughout the state.”

Property hot spots are seen as redeveloping areas within a 15 km radius of the city, offering affordable opportunities with good rental returns and growth potential. Greenacres in the north/east of Adelaide is an area to watch as well as Glanville and adjacent suburbs in the West. The approval of re-zoning at Mt Barker will provide for a huge growth of around 7000 dwellings for the area.

Mr Burton believes banks should be doing more to help keep the property market healthy and robust in 2011 and should consider abolishing mortgage exit fees.

“This would serve as a stimulus to the South Australian property market,” Mr Burton said.

“In addition, they should keep their moves on interest rates in line with the RBA rather than move independently and look at reducing loan fees.”

Mr Burton anticipates two additional interest rate increases which, if kept to below 0.5 per cent, should see the market hold up.

“Recent interest rate increases, together with the ending of the federal and state first home owners grant boost, have already impacted negatively on the property market which would be further exacerbated if future interest rate increases are above 0.5 per cent combined,” Mr Burton said.

According to Mr Burton the recent ‘breaking of the drought’, coupled with widely anticipated electricity price hikes are expected to see a change in the types of energy efficient features homebuyers are seeking.

“Water is no longer the issue driving energy efficient features – power is seen as the more important consideration,” Mr Burton said.

“Solar hot water and power, especially solar energy panels and efficient heating, cooling and lighting, will become the features that make a home more saleable.

“Costs of installation and poor aesthetics are seen as the key barriers to making energy efficiency features become more of a ‘selling’ feature for homes.”

Mr Burton said the government needs to do more to alleviate the lack of supply such as releasing more land, allowing more medium density developments, improving planning and approvals processes and controls, and introducing a national planning authority.