South Australia’s property market is expected to provide a stable option for investment over the course of this year, according to Knight Frank.
At a recent event, Knight Frank Chief Economist Ben Burston said Adelaide’s office leasing market had been less impacted by rising vacancy resulting from the pandemic than the bigger capitals of Sydney and Melbourne and industrial rent growth in the city was strong.
He added that the next sector to emerge will be build-to-rent due to undersupply in the residential market.
“Before the pandemic Adelaide’s office vacancy rate was 14% and by the end of 2022 it was 16%, reflecting a marginal increase, while in Melbourne and Sydney we saw an increase of 11% and 7% respectively,” he said.
“In Adelaide’s industrial market we have seen surging rental growth in line with the rest of the capital cities, with prime rents rising by 12%, just behind Brisbane at 16%. Meanwhile, over the past five years prices of industrial lots ranging from one to five hectares have more than doubled in Adelaide (+115%), with the city seeing stronger growth than Sydney (+110%) Brisbane (+85%) and Perth (+46%).
“But the sector to watch moving forward in Adelaide is build-to-rent – we predict there will be more of these projects due to the supply shortage in residential markets. Our data shows that while there are no completed build-to-rent projects or any under construction in Adelaide just yet, there are four schemes proposed totalling a potential 669 units, and we expect momentum to build in coming years.
“While this is still a comparatively small number compared to some of the bigger states, such as New South Wales, Victoria and Queensland, it is significant given that Adelaide has only just started looking at build-to-rent.”
Adelaide currently has the second lowest rental vacancy rate of the Australian capital cities at 0.5%, according to SQM Research.
Knight Frank Director, Head of Investment Sales South Australia Oliver Totani said despite some obvious economic headwinds impacting Australia, Adelaide’s property market remained a stable investment alternative.
“We must remember, South Australia doesn’t get the major peaks, so are protected from the major troughs on the downside,” he said.
“South Australia has a proactive and enterprising State Government, who has recently announced it is fast-tracking what will be the single largest release of residential land in the state’s history, which will deliver at least 23,700 more homes for South Australians. This is a great example of how the development and construction pipeline will hopefully be the shot in the arm that drives our economy through the anticipated market turbulence.
“There are more aggressive buyers for good quality assets in Adelaide than there are good quality assets currently being offered to market, which will underpin values moving forward.”
Knight Frank Managing Director South Australia Bobbette Scott said every market offered opportunities, but what was so compelling about Adelaide was that it continued to provide a stable and affordable investment environment for investors.
“With significant investment in South Australia, with world-class health and biomedical, entertainment and sporting precincts, innovation hubs for technology and entrepreneurship, and major defence projects in the pipeline there are certainly exciting times ahead for the state,” Scott said.