Why this Australian city's "prices never really fall"

With so many people across Australia homing in on Adelaide for a lifestyle change, the benefits are clear to see for investors.

Property is still very affordable, despite the staggering price increases of the past three years, and rents are rising sharply.

While the median weekly rent is still low in comparison to Sydney, Melbourne and Brisbane, according to the latest Domain figures, house rents have jumped 2.1 per cent in the last quarter, and 11.4 per cent in the past year, and apartment rents are up 5.3 per cent and 14.3 per cent over the same periods.

“Adelaide remains affordable with a lovely lifestyle that’s second to none, and there’s high demand for rental properties,” says Matt Smith, director and joint owner of Klemich Real Estate.

“Yields are lower closer to the city but capital growth is strong in those locations. Further out, there are good yields but the capital growth may be less.

“But, in any case, it’s highly unlikely that prices will drop. There’s been a slight correction, but that’s to be expected as prices couldn’t keep rising at the rate they have, and there is a shortage of stock.”

Overall, Adelaide rental yields are strong, on Domain figures, at 4.14 per cent for houses – up 2.1 per cent in the third quarter of this year alone – and 5.4 per cent for apartments, up 1.5 per cent on three months ago.

A lot of the investment currently flooding into Adelaide is from interstate, buoyed by the affordability of property.

The latest Real Estate Institute of South Australia (REISA ) report says that while interstate investors find the city’s east and inner rings most attractive, they’re also pleasantly surprised by the low prices in the north-west and south-west regions.

Oliver Bowler of real estate agents Ouwens Casserley says many investors from Sydney, Melbourne and Brisbane are buying townhouses off the plan to capitalise on depreciation opportunities.

“A three-bedroom townhouse in the inner east would cost around $700,00 to $900,000 and attract a rent of $650 to $750,” he says. “Something equivalent to that in a similarly quality suburb could cost $4 million to $5 million in Sydney.

“There’s also the advantage of not paying stamp duty, as well as capital growth and a reasonable yield.”

One of the major city-centre redevelopments to start construction soon is the iconic Central Market, and 96 per cent of the residences to be built as part of the project have now been sold, many of them to buyers from the east coast.

“We’ve had so many people coming here from interstate and overseas and a lot of them are waiting for new buildings to come online,” says Emma Slape, chief executive of Turner Real Estate and a director of REISA.

“So many of those are renting in the meantime, further increasing demand. And we’re seeing lots of investors wanting to put their money in real estate as the stock market is so volatile.

“Prices never really fall in Adelaide … they just carry on at a more balanced pace.”