Adelaide’s real estate market in 2021 has been unlike ever before, closing out the year with 21.4% annual price growth.
South Australia remained largely sheltered from the impacts of Covid-19 with strong border control in place and minimal lockdown disruptions. This enticed high levels of migration, particularly from Sydney and Melbourne, contributing to our real estate market strength throughout the pandemic.
The December CoreLogic report shows Adelaide values still continuing to rise. And while much of the country’s capitals begin to experience softer growth conditions, Adelaide values were up 2.5% in the month of November alone and 6.5% in the last quarter of 2021, compared to the national average of 4.4% [1].
But what is the outlook as we head into the new year? While predictions may not be something to bank on, we take a look at 3 key factors which could potentially slow Adelaide house price growth in 2022.
Financial limitations
The Adelaide real estate market benefitted from record low-interest rates and high savings rates in 2021. However, it became more challenging for buyers without savings or equity, and home values rose substantially more than household incomes over the year. Mortgage rates are anticipated to remain on hold until 2024, although we saw modest steps being taken by regulators to curb the unprecedented property price growth and rising level of household debt.
New finance regulations came into effect from November 2021, increasing the interest rate buffer from 2.5% to 3%. This means banks look at whether borrowers can afford a mortgage at 3% more than current mortgage rates. While only a slight touch at this point, the change to lending rules and restriction to finance can potentially slow down property markets as we have seen happen overseas. With rising concerns about affordability, there is the possibility we will see greater intervention from regulators in 2022.
Population increase may moderate
In 2021, Adelaide has been a magnet of attraction, luring strong buyer interest from interstate and the benefit of positive net migration. The state experienced an influx of interstate residents and ex-pats moving across to Adelaide in search of a lifestyle shift, more space, bigger homes, safety from Covid-19 and more affordable properties in comparison to Sydney and Melbourne.
South Australia’s strong border control cemented Adelaide as a safe haven along with high liveability factors and was even announced the 3rd most liveable city in the world and 1st in Australia by the EIU (Economist Intelligence Unit) in June 2021. This attracted ex-pats and their accumulated wealth back from Eastern states. The new residents compared Adelaide prices to Sydney and Melbourne and new pricing benchmarks were set for popular suburbs.
In late November 2021, South Australia relaxed its tight border control. The opening of borders has the potential to either negate the safe haven sentiment for Adelaide or it may further free up movement for relocation, provided Adelaide can maintain its attraction factors. In the event of flattening migration, this may slow things down and stabilise price growth.
Changing micro-markets
When we look back at 2021, we observe a market continually in flux with diverse suburbs and housing types at varying poles of Adelaide’s 21.4% annual price growth. In August 2021 houses in Medindie were up around 38 percent [2] while Adelaide apartments were down 10 percent [3]. But as international borders begin to re-open more fully, we anticipate an uplift in CBD apartment prices and changing market dynamics.
While most capital cities around the country began to experience a slowdown in price growth towards the end of 2021, this is less obvious across the regional areas of Australia, where capital gains accelerated over the last 3 months. Regional markets within commuting distance to the city remain accessible and popular with remote working arrangements [4].
The opening of South Australian borders and exponential price growth of Adelaide suburbs over 2021 may push demand further out to regional areas as we have seen throughout the pandemic, with those seeking safe locations and affordable lifestyle alternatives.
The outlook for 2022
For the 2022 Adelaide real estate market, it is still looking like a strong start to the year. This is supported by Ouwens Casserly’s most recent auction results continuing to show high clearance rates and active bidding at record levels with high competition.
Although as we head further along into the year, it is unlikely we will see a repeat of the rapid rates of increase we saw in 2021, just as sharp declines are also unlikely.
The above 3 factors have the potential to slow price growth in some suburbs in 2022 although the year remains largely uncertain, so if you are contemplating selling, now might be a great time to reduce risk and take advantage of the hot Adelaide real estate market.
Ready to sell? Read our Preparing for your next property move blog here or get an instant digital appraisal here.
Disclaimer
Ouwens Casserly has relied upon information from external sources in compiling this publication. Ouwens Casserly does not warrant its accuracy or completeness and does not accept any loss or damage sustained by readers, or by any other person or body corporate arising from or in connection with the supply or use of the whole or any part of the information in this publication through any cause whatsoever.
