The Adelaide Economy

How is the Adelaide economy going? With the space centre program, Submarine contracts and medical bio tech industries ramping up in Adelaide, is this enough to stimulate population growth and raise income levels and foster enough economic growth to make Adelaide a strong market moving forward in the next 5 to 10 years.
I noticed that in the last 2 years the unemplyment in Adelaide went from worst to 4th or 5th and the property market has had some positive upswing. However the latest data released by the ABS has unemployment rising again to be the worst in the country and property prices have dropped a little since the end of 2018.
Can anyone who knows a bit about the South Australian economy comment on the situation there. Over the years there has been commentary by people such as Malcom King (Adelaide's decline and fall (2014 In Daily) and Michael Yardney (17 March 2018 Here's why Adelaide's property market will continue to underperform - Property Update) which are concerning viewpoints.
At present while I have been searching on realestate.com.au I have noticed that rental vacancies have been very tight and properties have been selling quite quickly which to me points to a good outlook for this market. It is a very livable city as well.
Any thoughts ?

 

People like to poo on it usually come in 2 categories:
1) trolls or people who dont know any better parroting the media or other commentators (eg some people from these forums).
2) people who are selling properties in other places trying to steer towards their own benefit (eg yardney).

Economy was pretty slow while state ALP was in and picked up when state LNP (surprise, surprise). There was a bit of a lull after the federal election, perhaps from uncertainty but

Unemployment rate gets mentioned a lot but is pointless without context. I think there's a distinction to make between being high and being high for SA. SA runs at a higher rate than other places and it works. And new industries and companies moving in like you say, can only help.

As you've noticed yourself, and on the ground i can confirm, vacancy rates are very tight. This is typically a precursor to rents rising and therefore good things happening.

The bit that does concern me is the number of commercial for lease signs around at the moment. Hopefully thats not a sign of anything sinister.

 

That's just all the businesses shutting down from high energy prices, isn't it? Adelaide has some of the highest electricity costs in the world. The corporate landlords that work with their tenants to put on solar panels should fair better. Some are also putting in batteries.

 

Adelaide is a mixed bag, talking in very generalized terms, residential property within 15km of Adelaide CBD has had steady reliable capital growth over the past several years (3-5% PA) and will continue to do so for many years to come(in my honest opinion) because these are areas where the vast bulk of median- high income type working households reside and wish to raise families in close proximity to jobs/good schools/amenities, and the inner ring is already totally built out- by this I mean, no large tracts of land are available to provide vacant lots in bulk to be released onto the market (supply is low and demand is high).

Whereas suburbs further away from the CBD have had zero capital growth for the past 10 years. Reasons for this; a higher percentage of low-socioeconomic suburbs are further out, low-median incomes, coupled with huge tracts of vacant land being subdivided and sold off in bulk, means supply is high and demand is low (keeping prices subdued for many more years). However, good rental yields (cash flow positive properties) are obtained in the outer suburbs, which mean plenty of investors (seeking a better return on their money than cash in the bank) are still actively buying and holding rental properties in these areas.

I have hedged my bets both way, I hold cash flow positive properties 25km South of the CBD (8% rent return), and also hold cash flow negative properties 10km Sth-West of the CBD for capital growth, overall the portfolio costs me zero out of pocket at the end of each year (after tax return is done), and has had very constant tenancies (vacancy rates less than 1% over the past 8 years).

 

As DT above mentioned above, Adelaide's unemployment rate is not a reliable indicator of where property prices will go.

For example in early 2016 the City of Adelaide unemployment rate hit 10% and yet a collapse in housing prices didn't eventuate, capital growth within 15km of the CBD continued on.


For metropolitan Adelaide, I think a much better indicator of price growth is supply and demand. IMHO, the inner ring of Adelaide (within 15km of CBD) has not been overbuilt (with the exception of apartments in the CBD).

Our population growth per year is about 16,000 net increase, and about 8,000 new dwellings are added to the stock each year (from memory of ABS and HIA statistics), so generally, a balanced market.

 

It's interesting how one constant obstacle that is brought up for the SA economy – the price of electricity – is also one of the biggest opportunity.

Adelaide and SA overall are in a great position for the energy transition, wind and solar opportunities are some of best in the world (not a coincidence Tesla got involved). This article has a nice summary and information: South Australia unveils plans for 100% renewable hydrogen economy | RenewEconomy

The need for renewables is not going anywhere soon and will challenge economies sooner or later. For SA it means opportunities for business, growth and private investment. Whether it happens or not remains to be seen but the potential is there.

 

Interestingly there is a big push in W.A to take the maintenance off S.A for the submarine fleet since they are based here.
Not sure how the politics will play into it and you get a jobs gain in one state and a loss in another.

 

The Admiralty and the French contractor have both let the cat out of the bag - the contact will be divided in half and the maintenance sent to Perth - Did a French company accidentally tweet Australia's submarine plans?

There's only so much government pork to go round so I guess it's fair enough that Perth gets a slice.

 

It makes a balance from the spruikers here who are relentlessly talking up property with absolutely no evidence for our future economic prosperity or where the growth is going to come from to support higher prices.

We're still bleeding 5,000 people every year to Sydney and Melbourne (and overseas); we have the highest power prices in the world, we have the highest unemployment in Australia. That's not parroting the media, that's repeating FACTS.

I love my home city but I want the state and Commonwealth governments to urgently take action to make the cost of business here cheaper or things will continue to get worse.

 

Adelaide the best performing capital for real estate growth suburbs: Hotspotting's Terry Ryder

"While sources such as CoreLogic and SQM Research report annual growth of only 1-2% in Adelaide house prices, these generalised figures disguise individual areas which have done better. Our suburb-by-suburb analysis shows that 65% of Adelaide suburbs have median house prices higher than a year ago. Of the 123 suburbs which have recorded price growth, 51 have lifted more than 5%."

There's plenty of growth opportunity in Adelaide and it comes with the security of tight vacancy rates and great yields.

 

The highest unemployment in Australia and the highest electricity prices in the world - those two facts stand alone to make us one of the least attractive places to invest or set up businesses. At the very least payroll tax needs to be abolished in its entirety; it's a relic from another era when we taxed large employers simply for existing - and there needs to be state and Commonwealth intervention to bring down the price of electricity (and to a lesser extent water).

Who in their right mind would want to set up shop here when electricity and water are sky high, that fact alone deters any business from coming here.

 

Adelaide's rental vacancy rate is now just 0.9pc (SQM Research).

Could be the tightest capital city rental mkt soon...