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Substantial infrastructure investment, coupled with stronger resource prices and property affordability, is set to increase South Australian real estate activity in 2018, according to leading property group Raine & Horne.
“After five years of strong returns in Sydney and Melbourne, investor attention will start shifting to the Adelaide real estate market in 2018,” said Michael McDonald, general manager, Raine & Horne SA.
He said that “for starters” at around $430,000, the median Adelaide property value is “virtually equivalent” to a house deposit in Sydney.
“Moreover, the massive infrastructure investment currently underway will continue to create plenty of jobs and economic growth, which augers well for Adelaide property [in the] longer term.”
Mr McDonald said that the SA government announced a record infrastructure spend last year of $2.2 billion, well above the state government’s average annual commitment of $1.5 billion. He added that the total infrastructure investment of $9.5 billion over four years is expected to support 5,700 extra jobs on average annually.
“The jobs growth from infrastructure is in addition to the 10,000 new jobs created in South Australia over the past couple of years in a range of growing industries.”
A further $1.5 billion, the GM said, will be spent on public transport, while roads will receive $1.9 billion.
Mr McDonald also said that other major infrastructure projects include the $50 billion contract to build a new fleet for the Australian navy.
“The combined state and federal government spending on infrastructure will provide the necessary shot in the arm for the state economy,” the GM said.
“And consequently, Adelaide property prices should benefit by an average of 3 [per cent] to 5 per cent over the next three years or so.”
Regionals
Principal at Raine & Horne Roxby Downs Craig Sumsion said that a rally in commodity prices is good news for regional South Australian towns which stand to benefit from the construction of nearby Oz Minerals’ Carrapateena copper and gold mine.
Mr Sumsion noted that copper prices, for example, are up “by about 20 per cent” over the last 12 months.
“The Olympic Dam mine that contains a mix of uranium oxide, copper, gold and silver is undergoing expansion and maintenance work, which will contribute to more mining specialists moving to nearby Roxby Downs,” Mr Sumsion said.
“The resources downturn hurt the town and property values accordingly, with rental vacancy rates blowing out to almost 10 per cent.
“So, the increase in worker numbers at Olympic Dam augers well for the local real estate market, with vacancy rates already down to 1.5 per cent.”
Apart from a rise in full-time employees, Mr Sumsion said that there had been an increase in Drive In – Drive Out (DIDO) contract workers over the last six months.
“More contractors are helping to force down vacancy rates in Roxby Downs,” the principal said.
Concluding, Mr Sumsion said: “The combination of low vacancy rates, investment yields of almost 5 per cent, a median house price of $225,000 and a stronger economy will ensure that Roxby Downs is on investor radars in 2018.”
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