Adelaide Rental Market Analysis

Adelaide Rental Market Analysis
September 27, 2018 Propertyology

According to the last Census results, 28.9 per cent of Adelaide households are renting, making it the second highest capital city homeownership rate.

Median rents in Greater-Adelaide increased by a very mild 4.1 per cent (houses) and 3.6 per cent (attached dwellings) over the 5 years ending December 2017.

Very low wage growth over the last 5 years has had a significant influence on low rental growth in all Australian capital cities.

Analysis conducted by Propertyology looked at the historical trend of capital city rents between 1997 and 2017. We broke this 20-year period down in to four blocks of five years.

Rents in Adelaide, along with every Australian capital city, experienced the lowest growth in twenty years over the 5 years ending December 2017. Rents in some capital cities have substantially declined over that period.

Across each of the 5-year blocks, Adelaide property prices increased by 72 per cent over (5YE 2002), 77 per cent (5YE 2007), 15 per cent (5YE 2012) and 18 per cent (5YE 2017);

Wage growth in South Australia across each of the 5-year blocks was 17.5 per cent (5YE 2002), 21.1 (5YE 2007), 18.0 per cent (5YE 2012) and 12.2 per cent (5YE 2017).

Adelaide rental growth was strongest in the 5YE 2007 when business and consumer confidence and wage growth were the strongest.

We keep hearing that wages haven’t grown much at all in Australia post-GFC and how that’s hurting households because cost of living has increased. Propertyology’s research concluded that there is a direct correlation between rental growth and wage growth.

Unprecedented growth in investment lending over the 5 years ending December 2017 and the resultant extra supply of rental stock (predominantly in Sydney and Melbourne) has also played a significant role in suppressing the growth in rental prices.

It is indisputable that strong investor activity reduces pressure on household rents. Conversely, rental pressure builds when the investor appetite reduces.

Although investor activity in Adelaide for the 5YE 2017 wasn’t overly strong, a soft South Australian economy and a reduction in rates of population growth meant that rental demand wasn’t as high as earlier periods.

Interestingly, Adelaide has the highest proportion of semi-detached dwellings of all capital cities. 16.9 per cent of dwellings in Greater-Adelaide are townhouses and villas. Only 7.8 per cent of Adelaide’s 562,147 total dwellings are apartments (compared to Sydney’s 28.1 per cent).

There are several suburbs in Adelaide were the relationship median rent and median house price makes them cash flow positive for investors. Click here to review the Top 5 cash flow suburbs for each of Australia’s capital cities.

 

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