From the perspective of people who live in the eastern states, Adelaide’s house prices can look very attractive. There are even some people who perceive they might be able to buy a property with positive cash flow.
The challenge though is current market conditions. With an ongoing shortage of available properties plus high numbers of would-be buyers, most properties only last on the market for a few days, and in some cases for only a few hours.
The biggest challenge for agents is actually securing the listing – the selling part is virtually guaranteed.
So for buyers, there are no ‘cheap’ opportunities. If the listing indicates a price range, you can be confident the sale price will be at or above the range – sometimes significantly above. A recent survey indicates house prices in Adelaide have risen some 18% over last year, and by a remarkable 7.8% in the past month. The current median price is almost $630,000 while the median rent is just under $460/week, delivering around 3.8% gross annual yield.
Seasoned property investors know that between 24%-30% of the gross rent goes toward management, maintenance, insurance, rates & taxes, repairs and annual vacancy. This reduces the nett yield to more like 2.7%.
So the price of entry to median rental property investment in Adelaide, allowing for settlement costs, is approaching $600,000.
Competition is fierce for property below this price range.
Many are asking how long this can continue; no-one knows the answer, although some would suggest that when Adelaide prices get close to Melbourne & Sydney prices, they will begin to level off.
Until then, the opportunity is on the side of property owners looking to cash out.
