In South Australia, the dream of home ownership is becoming increasingly elusive for many. Recent statistics in from Core Logic paint a concerning picture of the challenges facing Adelaide home buyers and renters alike. With Adelaide, Brisbane, and Perth all reporting median dwelling values at peak price levels, the financial strain on potential homeowners is evident. According to Core Logic, Adelaide’s median dwelling value has soared to an astonishing $721,376. While this figure may not rival the heights of Sydney’s $1,122,430, it places Adelaide firmly among cities like Melbourne and Brisbane, with median values entrenched in the $700,000s. Nationally, the median dwelling value stands at $759,437, underscoring the widespread nature of the affordability challenge.

The Struggle for Affordability

The past few years have been especially turbulent for the housing market. Since the onset of COVID through to January 2024, Adelaide’s property values have soared by 53.7%, with Brisbane and Perth not far behind at 52% and 49.9% respectively. This surge outpaces the national increase of 27.7% over the same period, highlighting a significant state by state change disparity. The ripple effects of this surge are also felt strongly in regional South Australia, which has recorded a 52.4% growth since the pandemic began.

Housing affordability in South Australia is more than a mere challenge. Over the past year alone, housing values have increased by more than 10%, making the dream of home ownership increasingly elusive. The Local Government Area (LGA) of Playford recorded the highest annual increase at 16.1%, with other areas such as Salisbury, Port Adelaide, and Gawler witnessing significant hikes as well.

The burden of servicing loans has been exacerbated by successive mortgage rate hikes, despite the Reserve Bank of Australia’s (RBA) recent decision to hold the cash rate at 4.35%. This rate, significantly above the pre-COVID decade average of 2.55%, has put additional pressure on homeowners and buyers. While there’s a glimmer of hope with the anticipation of a cautious reduction in the cash rate, the path to mortgage rate relief remains uncertain and likely to be a slow one.

Is Renting the Answer?

Amidst these challenges, the rental market offers no respite. With rents in Adelaide rising by 7.9% for houses and 9.8% for units over the past year, the dilemma of whether to rent or buy becomes even more complex. Some individuals have adopted a strategic approach, opting to rent in their preferred location while purchasing property in more affordable areas to rent out. This tactic, however, is not without its challenges, given the overall increase in property and rental prices.

Influencing factors

The landscape is further complicated by shifts in migration patterns and flat consumer sentiment. A decrease in overseas migration may temporarily ease rental demand in major capitals, but the lag in home buying activity among permanent migrants suggests that the impact on the purchasing market may be delayed and so, yet to come. Consumer sentiment is in a state of pessimism, driven by high cost of living pressures and interest rates. Those pressures are unlikely to abate in the short term.

The outlook

As South Australians navigate this complex housing and rental market, the path forward requires careful consideration, strategic planning, and an eye on the ever-changing economic indicators. The dream of homeownership remains alive but achieving it in today’s market is a journey fraught with challenges and obstacles that demand resilience and adaptability.