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Why South Australia Could Be the Perfect Storm For New Investors
November 18, 2013
There could be unique benefits to investing in South Australia for first-time or younger investors. With much of Australia’s population living on the east coast, it is understandable that many investors stick to these states when investing. However, neglecting South Australia, Northern Territory, and Western Australia could be a missed opportunity for new investors.
However, South Australia; the country’s fifth largest state by population (overtaken by NSW, VIC, QLD, and WA), is often overlooked, however it really shouldn’t be. I dug a bit deeper to discover some of the reasons why SA offers some great reasons for young and first-time investors to consider this market.
Lower median price point than WA and NT, with comparable percentage returns
This is great for news for new investors. For instance, if a two-bedroom unit in a great location in inner-middle ring Adelaide can be picked up for $250K, and still achieve rental returns in excess of 5%, this is much less risky than say an inner-middle ring Darwin or Perth property that costs $450K, and offers a similar percentage return. This is the case with many quality suburbs in Adelaide, when compared with similar property types in Darwin and Adelaide. It is less risky for an investor to tie up a 20% deposit (I.e. much of their life savings) on a $250K well-yielding property, than a $450K well-yielding property. When coupled with government incentives (see below), the opportunity for investors in SA is that they have to use less of their own money/savings initially, to start seeing solid results and growth.
Unemployment has stabilised in SA amid state government incentives
Recently Pete Wargent observed Adelaide’s unemployment rate has fallen back to 6.6%, and the local economy appears to be increasingly stabilising after several years of decline and struggle. He predicts 0-3% capital growth for the city in 2014. SA very much has an ‘open for business’ policy right now, and offers incentives to ensure skilled worker population growth. Examples of this are visa incentives for migrants to Australia looking to pursue citizenship. Basically, if a migrant moves to Adelaide and lives/works/studies for two years in the city, citizenship becomes much easier than spending the same time period in other states.
Adelaide will benefit from nearby resources-driven town growth
I think the real value that Adelaide offers is its position as the population centre for regional SA mining and resources industry workers throughout the state. Just as Perth experienced positive growth over the past ten years due to its position as the ‘home base’ for mining town fly-in/fly-out workers; Adelaide will cement itself as being the place to live for renters working in regional SA mining towns in coming years. These include Port Augusta & surrounding townships (around a 3-4 hour drive from the city centre) as well as Arckaringa Basin area further north in the state. As this area picks up growth in coming years; Adelaide property will benefit
Highest volume of construction upstarts in Adelaide in over six years
Another key stat that supports South Australia’s growth is this; the past twelve months to Sep 30th, 2013, has had the highest volume of construction commencements in the past six years, according to RevenueSA, the state’s Treasury & Finance department. The city centre is constructing several vertical village-style projects, and approvals for construction of houses throughout SA is high, indicating underlying demand for property remains strong. This result is not doubt influenced by the state’s $8,500 grant/offer for home buyers who purchase a newly constructed home between October 2012 and December 2013.
Smart investors are able to look beyond their own backyard when considering their growth strategies. Sure, SA does not have the glitz of Sydney, the culture of Melbourne, or the tropics of Queensland, however it does offer some great numbers, but over the coming years, Adelaide and other parts of South Australia present unique opportunity that new and risk-adverse investors should not overlook.
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