In the interest of spontaneity, we continue our ‘Where are the Markets?’ series with Adelaide, bypassing Canberra and Melbourne on the journey south. The leap to Adelaide is in part spurred by increased enquiries regarding the city, having recently been repositioned further along the correction phase of the property clock (closer to opportunity).
So what does this mean for the Adelaide property market? Information gleaned from sales and growth data indicates that movement in the median price of an attached dwelling in Adelaide has historically been correlated with transactions growth. Put simply, percentage increases in transaction volumes have a tendency to lead price growth by 12 to 18 months, a trend that has been noted over a decade’s long sample.
Transaction numbers increased sharply in the late 2013/ early 2014 period. This heightened market activity, coupled with increasing affordability relative to its eastern seaboard counterparts, is likely to buoy the property market in 2015, albeit modestly.
However, Adelaide is constrained by a weak state economy and private capital investment that is a fifth of that of Queensland. As evidenced by the figure below, capital investment has remained relatively stable over the 14 year sample period (values are in millions). This is primarily a result of subdued economic conditions as well as the cancellation of major infrastructure projects within the sample period.
The city’s labour market has suffered as a result of low investment activity; Adelaide’s unemployment rate is 10 per cent higher than national figures. The silver lining on an otherwise dark cloud: the labour market is treading water rather than going backward as it was during the first half of 2014.
At this point negatives of the Adelaide property market outweigh the positives and much stronger opportunities exist elsewhere. Rest assured, however, that Blue Wealth will keep its finger on the pulse, ready to push the start button on Adelaide when the market begins to recover.
