For the first time in decades, the demand for rental accommodation in South Australia and Adelaide is “severely” outstripping the supply and conditions are only going to get tighter as the market enters a new year.
Inspire Realty CEO and founder Colin Lee (pictured) said vacancy rates are a key factor investors must watch closely next year.
“Adelaide now sits at a new record low of 0.9% compared to 2021 when the vacancy rate was already the lowest compared to all the capital cities in Australia,” he told Your Investment Property.
Citing data from PropTrack, the average days on market for Adelaide rental properties are at 16 days from advertising to signing the tenancy agreement which is the lowest in Australia.
“The critical shortage of rental properties means rents would invariably mean that landlords can demand more rent. In October 2022, Adelaide’s median weekly rent is $480 for houses and $380 for units,” Mr Lee said.
“The rental prices have increased by nearly 4% per cent over the October quarter to be 12.5% higher year-on-year.”
Mr Lee said in strong yields are also an important consideration for investors.
“Bottom line is that in order to get funding and leapfrog into the next property, you need both capital growth and strong yields which services as income for the next investment property,” he said.
“You must be generating a good yield for your property, so ideally buy into a neutrally geared or better still a positively geared property”
Turner Real Estate managing director Lachlan Turner (pictured below) said past 12 months have been incredibly strong for both house and unit markets in Adelaide, but things could potentially return to a more normal pace over the coming year.
“After such highs, I believe we will start to see prices level in Adelaide across all areas, however I don’t believe we will experience any major drops – we just may see a period of static growth as the market catches up,” he told Your Investment Property.
Still, Mr Turner said it is never wrong for investors to consider Adelaide as they plan their investment for 2023, given its relative affordability compared to other capital cities.
“I would encourage people to look at buying in 2023, our market has always shown stability during even the toughest times and with demand strong for the rental market, increased yields are now achievable,” he said.
Mr Turner said when looking at suburbs and regions to invest in, it is a must to check which ones have stable employment, infrastructure investments, and accessibility.
“Adelaide has moved ahead considerably the past decade and employment options have broadened with some major international companies setting up hubs — this is excellent to attract interstate and overseas migration and strengthen our state,” he said.
Angel Vale is a town in Adelaide Plains that sits on the northern edge of the capital city and enjoys a semi-rural feel close to open space, vineyards, and farms.
“You’ve got lots of green space out there, good schools and good connectivity to the city as well — it has a high percentage of owner-occupied properties and an extremely low vacancy rate,” Mr Lee said.
Elizabeth Park is an emerging suburb with a low vacancy rate — it possesses lots of opportunities for affordable investments.
One selling point is its proximity to Elizabeth city centre and two train stations, making it accessible and transport friendly.
Positioned South of Adelaide, Marion is actually a tightly held owner-occupier suburb, with only 28% of households being renters.
Marion has easy access to shops like Westfield Marion and Harvey Norman and Officeworks and is also surrounded by great parks and reserves. The suburb is also accessible to train stations.
Woodcroft is for the savvier investors — it has a higher owner-occupier rate, with only 20.6% renters.
“Always a good sign that this suburb is in demand for now and into the future. But be willing to spend nearly $1m in this suburb,” Mr Lee said.
This one is a suburb pick of Joust CEO Carl Hammerschmidt for Adelaide.
Situated just outside of the Adelaide city centre and close to public transport, houses in Firle have seen a rental yield of 2.8% and units of 4.8%.
“Firle has seen a compound growth rate of 24.6% for houses and 15.7% for units for the past five years,” Mr Hammerschmidt said.
“Around 11% of enquiries that came through for South Australia were for investment opportunities in Firle.”