The Adelaide housing market has always been known for its consistency, standing apart from the boom and bust cycles that often plague other capital cities like Sydney and Melbourne. However, as we enter the new normal of a post-pandemic world, along with rising interest rates and inflation, many wonder how the housing prices and rental market in Adelaide will fare.
The Adelaide housing market in mid-year 2022
Surprisingly, Adelaide is one of the few capital cities where housing values continue to rise despite the increase in interest rates. In the past three months alone, Adelaide has experienced a price growth of 3.6%, adding an impressive $201,000 to the average home price. Furthermore, there has been a significant 22% rise in sales, outperforming other major cities like Sydney and Melbourne.
The $400,000-$700,000 price range is receiving the most attention, indicating that first-time homebuyers, who are also owner-occupiers, are currently the most active market segment. However, experts predict that interest rate hikes and inflation may soon start impacting borrowing power and further soften the growth.
What does the Adelaide housing market look like for the rest of 2022?
While the housing market in Adelaide remains positive, there are signs that it may be losing steam. Quarterly growth from the first three months of 2022, which stood at an impressive 7.4%, dropped to 3.6% in the May to June quarter. This decline suggests that the market may enter a period of slower growth.
Australia's current interest rate of 1.85% as of August 2022 marks the fourth consecutive month of increases. These hikes will lead to a doubling of variable mortgage rates, potentially causing buyers to lose momentum. Additionally, unit prices in Adelaide rose by 1.4%, reaching a new record high. However, the growth in prices is primarily seen in houses rather than units.
Buyers Co-Founder, Pete Wargent, believes that competition is strong in coastal areas, but Adelaide is likely to fare better than other capitals due to its relative affordability and supply shortage, especially as immigration begins to ramp up again. Tim Lawless from Corelogic remains hopeful, stating that potential interest rate cuts predicted by economic forecasters may bring down interest rates as early as mid-2023. This could encourage more people to become homeowners and help alleviate housing affordability constraints.
What about the Adelaide rental market?
The rental market in Adelaide is experiencing strong growth, with a substantial 4.3% increase in rental prices in the previous quarter of 2022. Low vacancy rates and a limited supply of rental properties have created a tight rental market. For more details on the cost of rent in Adelaide, check out our dedicated article.
Should I sell my house now or wait until 2023?
Many potential buyers are hesitant to make decisions at the moment, as they are concerned about the potential rise in interest rates. According to Mr. Wargent from Buyers Co-Founder, future market predictions suggest that the cash rate target could go over 3% next year, causing borrowers to remain cautious until there is greater clarity. However, with Adelaide prices still going strong, sellers may have the upper hand compared to buyers. It's also important to consider whether you live centrally in Adelaide or in regional South Australia.
Regional markets have also been performing well, with buyers enjoying the benefits of hybrid work environments and being more open to living in regional South Australia instead of close to the capital cities' offices.
Which suburb is good for investment in Adelaide?
When compared to other capital cities such as Melbourne and Sydney, the Adelaide market offers more affordable options for investors. With low vacancy rates and stabilizing property prices, now is a good time to invest in homes in Adelaide and rent them out. Some of the best suburbs for investment in Adelaide include:
Taperoo, South Australia
- Median house price: $497,500
- Average rental yield: 4.8% annual growth
Taperoo, located about 18 kilometers northwest of Adelaide, is gaining attention as a highly livable suburb. With new developments and easy access to the CBD, the area offers a fantastic beachfront lifestyle that was once hidden under the radar.
Largs Bay, South Australia
- Median house price: $785,000
- Average rental yield: 4.8% annual growth
Largs Bay is a popular spot for investments in Adelaide, reporting excellent capital gains for property investors. The suburb boasts a friendly community, tree-lined streets, and well-maintained heritage homes, all just 16 kilometers from the city center.
Salisbury, South Australia
- Median house price: $429,500
- Average rental yield: 4.9% annual growth
Salisbury is a peaceful northern suburb of Adelaide that offers a friendly community and great amenities for families. With a reliable public transport system and easy access to the CBD, it is a desirable location for both investors and residents.
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