Month-In-Review-March-2015

Month in Review
March 2015
South Australia
Adelaide
It is interesting that for much of last year while the
interest rate remained on hold it was speculated that
the first movement would indeed be upwards and it
wasn’t really until the end of the year or even early
this year that the pressure began to mount on the
RBA for in fact a rate cut, and so on the first Tuesday
of February, 0.25% was wiped off the cash rate with
most banks and lending institutions passing on the
full quarter of a percent reduction.
by anyone with a mortgage, if the currently very low
interest rates were driving our market one would
suspect that our market should be performing better
than the approximately 3% per annum improvement
in capital value that occurred over 2014. As we have
mentioned numerous times before Adelaideans are
traditionally very conservative and local economic
factors, cost of living expenses and job security at
this time is playing a significant role in holding back
our market.
With Adelaide’s residential property market
remaining somewhat cautious in the wake of the
2010 to 2012 market downturn, a rate rise would
possibly have had a fairly noticeable impact on
the local market and the feeling was that all of the
positive improvements over the past two or so years,
such as increasing sales transactions, reducing
number of days on the market, decreasing vendor
discounting and auction clearance rates being
consistently above 50% could come to a grinding
halt, but the really good news is that for the time
being, we don’t have to worry about this occurring,
phew….. So where to from here?
Overall we don’t believe that this rate cut will make
much of a difference to our property market as it
currently stands, although we will be happy to be
proven wrong. Let us explain… Firstly mortgage rates
have been at all time lows for years now, so even
though a 0.25% reduction is going to be welcomed
It is fairly obvious that in the current financial
climate many are choosing to consolidate and pay
down debt and are not willing to commit to major
financial decisions such as buying or selling a house
until confidence improves. Home renovations,
improvements and extensions are very popular.
Investors on the other hand may possibly see the
drop in interest rates as a sign that it is time to act.
With the hint of a further 0.25% reduction it appears
that rates may be set to remain around fairly similar
low levels into the foreseeable future and all of
the other fundamentals for solid medium to long
term investment returns remain in place. Adelaide
offers very affordable entry level prices (cheapest
on the mainland), yields continue to remain above
4% gross and vacancy rates have been very stable
(often below 2% over the past few years), and capital
growth appears to be slowly improving. In fact the
feeling was that increasing investor activity during
2014 has played a significant hand in the steady
ongoing recovery of our housing market.
Generally Adelaide investors are most active in the
sub $500,000 segment and we believe that sales
activity in this price bracket may improve during
2015 and as a direct result there may be a slight
improvement above what is expected in capital
growth. However at this stage we don’t believe that it
will be significant. Unfortunately, increased investor
activity may come at the expense of first home
buyers also looking to buy in this lower price bracket.
Investors are probably going to out compete first
home buyers for sub $500,000 established dwellings
located closer to the city, yet again pushing first
home buyers into the far outer suburbs.
We believe that overall during 2015 our market will
continue on its path of steady recovery and translate
Residential
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