Economy

Australia’s strange property market flip-flop – Adelaide the new hotspot

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A great reversal of fortunes is underway in Australia’s housing market, with changing dynamics creating an unlikely new list of property winners and losers across the states.

A great reversal of fortunes is underway in Australia’s housing market, with changing dynamics creating an unlikely new list of property winners and losers across the states.

Once the ugly duckling of Australian property, home owners in Adelaide are now enjoying the fastest rate of home price appreciation in the country.

RP Data research director Tim Lawless says house prices in Adelaide increased 4.7% in the first five months of 2008, well ahead of the next best city, Brisbane, with its 1.7% price growth.

“It has been the sleepy state – 10 years ago, people would joke about that the only reason you’d go to Adelaide is to die. But it’s altogether different now, thanks to a burgeoning resources and café culture, smart urban renewal and very affordable prices as well,” Lawless says.

At the other end of the scale is Perth. Once vying with Sydney for the title as Australia’s most expensive property market, house prices in the western capital have gone backwards for the past two quarters.

“The bubble has burst in Perth – looking back at the house price growth in late 2006, that was never going to be sustained,” Lawless says. “We are really seeing some balance being restored there now, but we will probably continue to see negative movements in coming months.”

But perhaps the most unlikely reversal of fortune remains uncertain and is in its early stages – the resurrection of house price growth in western Sydney.

According to Lawless, the predictable backward movement in house prices we have seen in Sydney’s west since 2004 now appears to be coming to an end.

“We are starting to see more volatility there from quarter to quarter, with prices going up and down, so those markets may have reached the floor. Rental yields are improving there to around 5.5%, so prices are pretty competitive, and I don’t think they will go heavily backwards from here,” he says.

Despite the mixed house price picture, recent bank initiated rate rises saw mostly negative auction clearance rates this weekend. Brisbane was the one positive mover, up from a 24% clearance rate to 45% this weekend, Melbourne’s 63% clearance rate was steady, while Sydney fell from 53% to 51% and Adelaide from 41% to 39%.

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