2010 Adelaide Apartment Predictions

Here we are at the start of a brand new decade, and the big question that interests us is: "What will happen to apartment values in the City of Adelaide over the next 12 months?"

Our educated guess is that the better quality apartments in the middle price range will increase by around 6.5% to 8%. This means that a well located 2 bedroom, 80 square metre, apartment with a secure carpark that sold for $470,000 in December 2009 could sell for around $505,000 in December 2010. A 110 square metre with 2 bedrooms, 2 bathrooms, secure carpark, storage cage, and a good size balcony in the same time frame could go from $650,000 to $705,000.

The macro factors that influence capital growth in the City apartment market include:

• Apartment supply. It looks like there won't be many new buildings completed during 2010 because developers are still having a tough time securing funds from the banks which are demanding a lot more equity contributions and very high levels of pre-sales. If supply of new apartment stock diminishes, price increases for existing stock can occur.
• A tight rental market. The rental demand for apartments in the city remains strong. It is underpinned by the international student market as well as the professional couples and corporates attracted by our vibrant city lifestyle, security, and the facilities offered by modern apartment buildings.
• Baby Boomers. Each year we see more of them coming into the City to live. The "lock and leave it" appeal of apartments, and the cafe lifestyle continue to be the strong drivers for this demographic.
• Good investor returns. Interest rates have gone up, but so have rentals, and buying an apartment as an investment is still a very big part of the city marketplace. This includes country buyers as a future city base or for the kids if they migrate to the city for uni at some time in the future.
• Consumer confidence. This is the feel good factor and our perception of how we feel about ourselves and our confidence in our economy. We are looking ok on this one but sentiment can change quickly and when confidence drops, people stop spending and buying apartments.

Baby Boomers on the move...

We have just sold this 1982 townhome in North Adelaide. We had lots of interest from younger buyers eligible for the first home owner's grant, but as with many of our sales lately it was secured by a "Baby Boomer on the move". These are pre-retirement boomers, who are still working, fit and healthy, but are also planning the next phase of their lives.

Often they live in a large house worth $1 million plus in an inner suburb, but their family is growing up and moving out. They are empty nesters and the nest will soon be way too big. The plan now is a city pad and a beach house or country cottage so that when they finish working they have "a best of both worlds" lifestyle.

Our buyer has just bought a country cottage as well as this North Adelaide townhome - both will be great investments as they are rented out negatively geared over the next few years. Then when it is time to sell the Unley Park family home he can freehold the investment properties with plenty of moolah left over!