By Bart Quinn

Following four consecutive quarters of positive growth, Adelaide’s median house price has hit record highs, exceeding $400,000 for the first time.

According to researcher RP Data, Adelaide’s median metropolitan house price rose by 9.1 percent in the year to February 2010, boosting the city’s median value to $405,000. Even though this growth rate remains below the national average it represents a good result for the state, which remains the most affordable mainland capital city by a wide margin.

Although many forecasters predicted a slow start to 2010 following the withdrawal of first home buyers, activity levels have persisted with renewed confidence from investors and middle and prestige buyers.

Evidenced by REISA data showing an increase in the number of metropolitan suburbs with median values above $1 million, quality high end property is in good demand. The growth experienced in the middle and upper market segments in recent months will continue at current levels in the short term, due largely to short supply and significant demand in inner areas; however, in the second half of 2010 prices are expected to stabilise due to pressure from higher interest rates.

While the unit market performed strongly in 2009, achieving record prices, it is anticipated that growth in this segment will also stabilise offering lower rates of capital appreciation than its housing counterpart. It is also predicted that the lower end of Adelaide’s property market in the outer mortgage belt areas will slow at a more substantial rate when compared with the middle and upper segments.

Traditionally, Adelaide’s most sought after suburbs have been in the inner eastern and southern suburbs, which offer considerable stock of period housing. However issues of increasing unaffordability have seen the city’s west grow in popularity in recent times. While still offering stock of quality period dwellings, western suburbs like Lockelys are benefiting from increased demand, which will translate to improvement in property values.

Despite issues of affordability there remains good value in the middle ring suburbs, or those within 15km of the CBD, offering older housing stock. Suburbs such as Woodville North and Hill Crest in the North and Park Holme and Chapham in the south are expected to have solid capital growth in coming years as buyers are increasingly priced out of highly sought neighbouring inner suburbs.

Following the financial hardships and negative sentiment during the GFC there has been an increasing trend of homes owners to renovate and extend their properties. This is particularly the case in eastern and southern suburbs Medindie, Norwood, Dulwich, Rose Park and Unley, which now offer only a limited number of homes for sale, presenting good opportunity for property values in these areas in the future.

A further windfall for home values in Adelaide will come from the highly anticipated, and soon to be completed, Northern Expressway, which will link Gawler to the Adelaide inner northern suburbs (via Port Wakefield Rd), effectively creating a non-stop commute to the Adelaide area.

On the rentals front, overall, the market in Adelaide remains very tight offering vacancy rates ranging from as little as .96 percent in Adelaide Hills and 1.34 percent in the city, enabling strong yields for both units and houses.

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