2008 Property Outlook: Affordability to Slip

Today’s interest rate rise – the third in six months – is unlikely to slow or stall the steady performance of Adelaide’s property market, according to First National Real Estate.

“Most buyers will have factored in at least one rise this year,” CEO Ray Ellis said. “All the signs for the property sector in Adelaide and key centres in the state are that the very solid performance seen in 2007 will continue, on the back of a sound economic outlook.”

In its forthcoming 2008 property outlook report, First National Real Estate says the steady and consistent property price growth seen in Adelaide over recent years should continue in 2008.

“The resources boom is continuing to benefit the market and, while the median house price is moving up strongly, the city will remain attractive to first home-buyers and investors as it offers affordable options in comparison with other state capitals, with the exception of Hobart,” Mr Ellis said.

“The challenge will be for Adelaide to maintain this attractiveness as price growth continues and avoid the affordability issues now seen in cities such as Melbourne, Sydney and Brisbane. While a result of good growth is always the pricing out of many buyers from sought-after inner suburbs, policies to encourage supply and to ensure consistent growth across middle and outer suburbs and not just price spirals in selected pockets are key to the long term success of the market.”

Mr Ellis said the fact that the median house price is has now hit $350,000 would be discouraging for many first home-buyers and young families, but outer suburbs, the apartment market, and some areas of the highly-regarded Adelaide Hills continue to offer very affordable options with good growth potential.

First National Real Estate said growth should remain particularly strong in the vibrant inner lifestyle suburbs such as Adelaide, Norwood, Prospect, Burnside and Torrensville. In middle and outer suburbs such as Belair, Tea Tree Gully, Myrtle Bank, Underdale, Elizabeth Park and Croydon Park growth may ease slightly from the strong performance seen in 2007 as higher interest rates and living costs bite into budgets, but the overall outlook remains sound. .

Rental prices also surged in Adelaide in 2007 and this is expected to continue throughout 2008, as local employment opportunities push demand, particularly in the western suburbs of Mansfield Park and Woodville North.

A shortage of properties in the southern suburbs should also see rent prices grow strongly in this area.

Regional South Australia can also expect strong house price growth to continue, with the resources boom sustaining momentum in centres such as Mt Gambier, Whyalla and Port Augusta.

Towns in tourist destinations such as the Limestone Coast region are also benefiting from the strong interest in the market, as retirees and the sea-change movement seeks out opportunities more affordable than those currently available in the eastern states.

Overall, housing affordability will dominate discussion of Australia’s property market in 2008, according to First National Real Estate, with focus on State Government taxes, development approval processes and land release programmes. Other key trends at the national level will include:
· Strong apartment sales in most markets, driven by buyers looking for more affordable housing in near inner city locations and frustrated with rising rents;
· A continuing green energy push across both the residential and commercial sectors, with growing demand for sustainable homes and “green” office space; and
A return to property by some investors who decide to wait out the present stock market volatility, further adding to continuing rising prices in some