The Adelaide suburbs that have boomed

Everyone loves a bit of good-natured rivalry, so when Adelaide was recently named one of the world’s 20 most beautiful cities by an influential design magazine, it didn’t take long before the ribbing began.

SA Premier Peter Malinauskas took to social media to highlight the honour, bestowed by US-based Architectural Digest magazine.

But Victorian premier Jacinta Allan was quick to shoot back, highlighting Melbourne’s supposedly superior culinary offerings and nightlife.

“That’s cool and all, but if you need a place to eat after 5pm, hit us up!” she tweeted.

Ouch!

Adelaide’s local paper, The Advertiser, decided to take the stoush further, pointing out that the SA capital has more hours of sunshine per year than gloomy Melbourne, its drivers are politer than Melburnians, commute times are less, and Adelaide baristas are less rude. (Listed: Why Adelaide is better than Melbourne)

Adelaide is booming

The article also made some serious points, including that homes are cheaper in Adelaide and that SA is “an investor’s market”.

Reporter Lydia Kellner pointed out that houses in Adelaide sell for a median price of $760,000, while units transact for $510,000.

In Melbourne, by comparison, buyers have to contend with a median house price of $875,000, while the median unit costs $605,000.

What the author did not tell us is that the price gap between the two southern cities is shrinking rapidly.

A chronic undersupply of homes in Adelaide at a time of strong economic activity and solid population growth has created a property boom in the City of Churches, which has seen median dwelling values shoot up an astonishing 15.5% in just 12 months.

At the same time, CoreLogic says Melbourne property values increased just 0.2%.

Suburbs that have led the growth 

However, that stellar growth of 15.5% is a median for all dwellings across all of Greater Adelaide.

Some parts of the SA capital have grown at much faster rates.

So, where have the best places for growth been in Adelaide?

The research team at Freedom Property Investors has been crunching the numbers.

The first thing you will notice about the list of Adelaide suburbs where house values have grown the most is just how big the jump in values has been over the last 12 months.

The top 20 suburbs all have growth rates well above the annual city median dwelling value increase, with the top 4 experiencing more than double the city-wide growth.

The other extraordinary thing is how many of these suburbs are relatively affordable, especially if you live in Sydney, Canberra, Brisbane or Melbourne.

For the price of a median Sydney apartment, for example, you could afford 2 houses in Elizabeth North. 

Half of the top 20 fastest-growing Adelaide suburbs had a purchase price of $681,428 or less and in 6 of them, you could have picked up a house with an annual median growth rate of 26.7% or more for less than $500,000.

Part of that strength in the affordable end of the home market has been driven by state government incentives for first-home buyers who build or buy a new home, and investors piling in from interstate, attracted by excellent rental yields.

If you look at the table for the 20 Adelaide suburbs where houses have experienced the weakest growth over the past year, all have values of more than $756,012 and 12 have values above $1 million.

The clear take-out from these charts is that with the exception of the seaside resort of Glenelg and a number of ritzy suburbs in Adelaide’s inner east, the big annual jump in median house values has come in affordable suburbs in the city’s outer north and west.

When you look at the suburbs where median unit values have shot up, again the thing that stands out is the extraordinary rate of growth and relative affordability compared to other cities.

Also, you’ll note that 16 out of 20 of the suburbs in this list are within 10 kms of the Adelaide CBD.

That’s not to say every unit market within the vicinity of the Adelaide CBD is gold.

Like anything else, you need to do your homework and due diligence, with inner suburbs like Kent Town, Marleston, and Adelaide City itself all under-performing over the past 12 months.

“Under-perfoming” is a relative term in Adelaide, with only one suburb that we have surveyed - Kent Town on the CBD’s north-east edge-seeing unit values going backwards over the last year.

As the Real Estate Institute of SA said in its latest market update, “South Australia’s real estate market continues to do astonishingly well, despite the low supply of housing stock and the prevailing high interest rates.”

Happy customers

As an example of some of that “astonishing” house value growth that has taken place in Adelaide’s affordable areas, I can do no better than to share the story of two of my clients, Melbourne couple Emil and Mary.

Freedom’s team of analysts looked at their financial situation and recommended they invest in a house and land package in one of Adelaide’s booming northern suburbs.

In late May last year, Emil and Mary agreed to pay $555,000 on a fixed price contract to buy a plot of land and build a spacious 4-bedroom home.

They paid a $10,000 deposit for the land and $16,750 as a deposit to the builder.

The local Council has dragged its feet (there’s currently a chronic shortage of Town Planners in Australia) and it has taken longer than expected to get their land titled by Land Services SA, but Emil and Mary are likely to formally take possession of their land in the next six weeks, so building their investment property can finally begin.

“They must be annoyed with the delays!” I hear you say.

Actually, nothing could be further from the truth.

In the 14 months since Emil and Mary signed on the dotted line, the value of land in that part of Adelaide’s north has exploded.

Almost identical 4-bedroom house and land packages in the same planned estate are now being advertised for $760,000 - $770,000.

Emil and Mary have basically made a $200,000+ windfall in a little over a year by doing absolutely nothing and so far parting with just $26,750 of their own money.

That’s the kind of amazing growth that’s been happening in Adelaide - but only if you know where to look.