Prestige Properties In Adelaide Pique Buyer Interest
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Prestige Properties In Adelaide Pique Buyer Interest

A combination of low Covid rates and lifestyle changes are putting more attention on the South Australian capital

By Michelle Singer
Mon, Feb 8, 2021 2:23amGrey Clock 5 min

Sandstone villas and opulent mansions in South Australia’s premier inner-city suburbs have become hot property for Adelaide house hunters looking for lifestyle as well as economic security.

While there’s been plenty of activity and attention placed on rural living and lifestyle areas, Adelaide’s inner-city listings too, particularly in blue chip suburbs such as Toorak Gardens and North Adelaide, have also been snapped up for record prices in the past few months.

Several driving factors have helped pique interest and confidence, not least the city’s handling of the pandemic—with less than 600 cases in total and four deaths.

As of December, its unemployment rate of 6.4% was no longer the highest in the country and its relatively affordable median house price of $509,978  and Australia’s historically low interest rates has contributed to its appeal.

Housing is half the price of Sydney, where median house prices have passed $1 million, and more than 60% cheaper than Melbourne’s median house price of $821,904.

Fox Real Estate principal Andrew Fox said there was uncertainty in the market around March and April but confidence returned quickly and activity and prices “went from strength to strength.”

“We were very fortunate in 2020,” he said. “Many generational top-end properties changed hands for excellent prices while low interest rates and low stock levels fueled the market.”

Sotheby’s South Australia director Grant Giordano confirmed that “a lot has been happening in terms of luxury sales” around Adelaide and said it still offers great relative value compared to other cities.

“These prestige properties are incredibly attractive, I always talk about the relative value of Adelaide, when you’re buying one of these properties, you’re buying tomorrow’s value today,” he said.

“It’s a city that goes through a cyclical cycle, once one big sale occurs, they all go and reset the market’s expectations.”

He said South Australians have adjusted their lifestyle habits as a result of the pandemic.

“People have more disposable income and are limiting discretionary buys and instead investing in their day-to-day lifestyle because they’re stuck at home,” he said.

“Many buyers are thinking ‘If I’m stuck at home might as well enjoy the space which I’m currently in’,” he said.

Williams Luxury managing director Stephanie Williams said 2020 brought about a distinct shift among Adelaide’s more affluent buyers, who sought larger properties that are better suited to the current “Covid lifestyle,” that include home offices, gyms, theatre rooms and outdoor areas.

“As we are all spending more time at home our needs have broadened somewhat to require these extra living environments and our high profile clients and professionals are now working from home more than ever before,” Ms Williams said.

“We also have a strong level of international relocations and ex-pats returning to Adelaide—as it offers excellent lifestyle options with very low levels of congestion,” she said. “Extremely low-interest rates, improved lending conditions from the banks, government stimulus and an absolute lack of supply in both sales and rental properties are also key fundamentals in driving the current market.”

“It’s very close to the perfect storm for vendors right now, as everyone wants to buy and only a very low number of people actually want to sell.”

Prestige Properties

Reputable and refined, North Adelaide is known for its stunning mansions and tall terraces on leafy lined streets, where a statue of naval officer and the state’s first surveyor-general Colonel William Light stands atop Montefiore Hill, overlooking the city he planned.

North Adelaide’s charismatic old homes and well-to-do residents have long defined the suburb’s distinct social, cultural and geographic differences.

All but one of Adelaide’s 10 most expensive homes were built in the 1800s and they remain highly sought after as proven in late 2020 when the historic North Adelaide mansion at Molesworth Street went under contract within three days of hitting the market.

North Adelaide mansion
Sotheby’s South Australia

 

Sold through Sotheby’s South Australia, the $4.5 million sale price made it one of North Adelaide’s most expensive transactions on record.

Neighbourhood amenities such as grand old pubs, modern hip cafes, gourmet supermarkets and a diverse range of restaurants contribute greatly to the village atmosphere, while the impressive and revamped Adelaide Oval sporting ground lies between the suburb and the central business district.

A walk along the River Torrens leads to the Adelaide Zoo, the city’s aquatic centre, and the education facilities, such as North Adelaide Primary, are not only among the state’s oldest but with Adelaide High School, among the top performers too.

The rich selection of amenities contributes significantly to the appeal, Mr Giordano said, with buyers eager to get into the area.

“Very rarely on the city fringe do you have such green and private living so conveniently laid out. When you’re talking about the Adelaide Hills or beach lifestyle, they’re lifestyle choices at the expense of convenience,” he said. “In North Adelaide, you make no compromise. It’s the closest suburb to the city and it has some of the grandest and most historically resonant properties in Adelaide.”

The exclusive location and quality of housing are what attracts the suburb’s two main demographics, Ms Williams said, with families attracted to the lifestyle and close proximity to elite schools while professional couples appreciate the cosmopolitan lifestyle, golf courses, parklands and close proximity to the Adelaide Oval.

Outlook 2021

Buyer interest in Adelaide is widespread. The number of eyeballs per online listing city-wide increased dramatically between 2019 and 2020, and according to CoreLogic’s head of research Tim Lawless, the city received minimal disruption during the pandemic.

“Adelaide housing values reached a new record high in November after recording five consecutive months of growth,” Mr Lawless said in his review of the 2020 market.

“Adelaide’s housing market has seen minimal disruption through the Covid period so far, only recording one month where values dipped lower—a drop of only 0.2% in June.”

Figures released by realestate.com.au also show suburbs such as North Adelaide are among the most sought-after by online house hunters, recording a 92% increase in views per listing in 2020 compared to 2019.

One of 2020’s hottest listings was an 1878-built sandstone villa on Mills Terrace, North Adelaide, which attracted almost 18,000 views in the leadup to its Dec. 20 auction through Williams Luxury.

sandstone villa

Six registered bidders took part in the auction of 52 Mills Terrace, North Adelaide, which sold for $3.3million on December 20.

Williams Luxury

The grand and imposing four-bedroom home occupying a 1200 square metre landscaped block on one of North Adelaide’s most prestigious streets sold at auction for $3.3million and attracted six registered local and interstate-based bidders.

“North Adelaide generally has a very low level of luxury homes available to the market and the most prestigious properties can be tightly held by the same family for generations,” Ms Williams said.

“The market conditions at the end of 2020 were very unusual for the area with several luxury homes coming onto the market around the same time,” she said. “All of these properties have now sold and we are back to experiencing traditional very low levels of new properties coming onto the market.“

CoreLogic figures for North Adelaide show the suburb’s median house price first broke the $1 million barrier in October 2020, while SQM Research listing data highlights the shortage of property available for sale, with 28 houses available in January, the lowest since June 2020.

Mr Fox remains confident about Adelaide’s outlook, particularly given its reputation as a “safe haven” when it comes to health and the economy, two contributing factors that had lured many expats back from overseas as well as new residents from interstate.

“Our inner-city, hills, regional and beachside locations have seen significant growth and are always sought-after, but we have seen demand and growth pretty much across the board,” he said.

“The prestige market is extremely strong and it’s probably the most opportune time to sell in years. Stock levels are relatively low and it’s not unusual to receive a dozen or so offers on a prestige property, and we can’t see it slowing down this year,” he added.

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Investor buying of homes tumbled 30% in the third quarter, a sign that the rise in borrowing rates and high home prices that pushed traditional buyers to the sidelines are causing these firms to pull back, too.

Companies bought around 66,000 homes in the 40 markets tracked by real-estate brokerage Redfin during the third quarter, compared with 94,000 homes during the same quarter a year ago. The percentage decline in investor purchases was the largest in a quarter since the subprime crisis, save for the second quarter of 2020 when the pandemic shut down most home buying.

The investor pullback represents a turnaround from months ago when their purchases were still rising fast. These firms bought homes in record numbers last year and earlier this year, helping to supercharge the housing market.

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These firms have seized on a pandemic-driven rise in demand for houses in suburban areas. These owners rented out the homes and increased rents on homes by double-digit percentages. By the first quarter of 2022, investors accounted for one in every five home purchases nationally.

But ballooning borrowing costs have kept investors from buying as much recently, said John Pawlowski, an analyst at Green Street. Buyers and sellers are also agreeing less often on pricing, stifling sales.

“It leads to a lot of people just putting down the pen,” Mr. Pawlowski said.

Rent growth has also begun to slow. Rents for single-family homes rose 10.1% year over year in September, down from 13.9% in April, according to housing data firm CoreLogic.

That rate of growth is still very high by historical standards, however, and much stronger than in the apartment market. Multifamily rent increases are now much lower by most measures. Near record-high rental prices are failing to attract as many new tenants, and demand in the third quarter fell to its lowest level in 13 years.

Demand for rental houses has held up better, in part because many of these homes are leased to relatively high-earning people who have found the for-sale market too expensive to buy, some analysts say.

That rent growth for single-family owners hasn’t translated into stock-market gains this year. Investors have lumped these owners in with home builders and sold many of them. Shares for the three largest publicly traded owners, Invitation Homes, American Homes 4 Rent and Tricon Residential, are each down more than 25% year to date, underperforming the S&P 500 over that period.

Rental landlords also face headwinds from rising property tax assessments that have come alongside enormous increases in home-price appreciation.

At the same time, large rental landlords are coming under greater scrutiny from federal and local governments. Congressional Democrats have hosted a series of hearings focused on eviction practices and rent increases. Three Congress members from California this month introduced a bill called the “Stop Wall Street Landlords Act,” which proposes levying new taxes on single-family landlords. It would prevent government-sponsored enterprises like Freddie Mac from acquiring and securitising their debt.

Many of the places where investors have eased purchasing are the same cities where they had counted for an outsize share of total sales. That includes Las Vegas and Phoenix, where investor sales dropped more than 44% in the third quarter compared with a year ago.

Fewer purchases by online house-flippers, or iBuyers, may have contributed to those declines, according to Redfin. Redfin decided to close its own home-flipping business, RedfinNow, earlier this month.

Nationally, investors still accounted for 17.5% of all home sales in the third quarter, a higher share than they held at any time before the pandemic, by Redfin’s count.

That share seems likely to rise again. Builders with unsold homes due to widespread cancellations by traditional buyers have been looking to sell in bulk to rental landlords.

Meanwhile, some institutional investors are now readying large funds to snap up homes. J.P. Morgan’s asset-management business said this month it had formed a joint venture with rental landlord Haven Realty Capital to purchase and develop $1 billion in houses. A unit of real-estate firm JLL’s LaSalle Investment Management, in partnership with the landlord Amherst Group, said it plans to buy $500 million of homes over the next two years.

Tricon has nearly $3 billion it plans to tap to buy and build homes. “We will lean in and deploy that capital when the time is right,” Tricon’s Chief Executive Gary Berman said on a November earnings call.

While a recession could bring down borrowing rates, it would likely be accompanied by higher unemployment, making it difficult for traditional buyers to take advantage, said Daryl Fairweather, Redfin’s chief economist. For investors, however, that could offer an opportunity to acquire homes at favourable prices.

“An investor may have more resources to jump in at exactly the moment when rates decline,” Ms. Fairweather said.

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