Property Growth Tipped to Continue in Adelaide

South Australia is riding a mining investment surge, which is increasing employment and driving record levels of overseas migration. Predictably property prices have been booming and look set to continue to do so.

Adelaide Skyline

One of the key factors drving housing prices in Adelaide is affordability. The current median price of $350,000 (March 2008) is currently the lowest of all Australia’s capitals.

South Australia’s economy is fundamentally changing from its traditional role as the manufacturing base for the eastern states. Resource industries and defense is increasingly important. South Australia is now ranked fourth in the word in terms of mining potential by the Canada’s Fraser Institute Annual Survey of Mining Companies. The gigantic Olympic Dam mine is the world’s largest uranium mine. In December 2007 South Australia’s mineral exploration expenditure reached $328 million, making it Australia’s second highest level of exploration investment, after Western Australia.

With huge amounts of cash going towards gold exploration, that traditional safe haven in uncertain financial times it seems likely that the boom will be continuing for a while.

Adelaide’s metropolitan property market has seen growth rates of over 40% since June 2007. Key areas to watch in the future will those neighbouring high-growth rate areas including the suburbs of Thebarton, Elizabeth, Brighton, Rosewater and Ethelto.

The growth appears strongly based on the demand side of the curve. Vacancy rates are also low with Adelaide’s rental vacancies being lower than the 3% average in other capitals, at 1.7%

It looks likely that the combination of affordability and population growth will continue so long as the mining industry keeps investing and driving employment and salaries which of course is the big question in the current financial crises. So long as China keeps buying base metals South Australia and the other resource-rich states: Queensland and Western Australia, should come out of the current financial crises in fairly good order.

The biggest infra-structure problem the large desert state has is lack of water. The only significant river is the once-mighty Murray River which is now dying: not only because of years of drought but also because of decades of over-irrigation in Victoria. Laughable though it is, prior to the drought Victoria and NSW were major rice producers, a crop which requires huge amount of water. Even before the drought Adelaide’s drinking water routinely had a brown tinge, and this has only got worse over the years. To cope with sustained growth the city will have to look to alternative sources of fresh water: possibly desalination plants as used successfully in Perth.  These certainly won’t be cheap but at least the large mining-revenues will be there to pay for it.

Photo Credit: JohnvW