Adelaide

ADELAIDE LAND MARKET CONTINUES TO STRUGGLE

By February 9, 2017 No Comments

Land Sale Volumes

The Adelaide new land market lost some of its momentum this survey with land sale volumes falling 18% to 139 sales per month. Sales compared to a year ago are 22% down.

The major reason for this fall in sales was a drop in sale volumes across some of Adelaide’s major residential projects; such as Lightsview.

This survey, the number of lots being returned to estates increased. The cancellation rate is now equal to 22% of gross activity, just short of the record set in later 2012 of 25%.

Industry Capacity

The number of estates which recorded sales for the quarter increased from 55 to 59, with the average project sale rate being 2 lots per month. An interesting note is that the average project sale rate for Adelaide and Perth estates are now the same.

The production of new lots fell by 22% to 488 lots for the survey period. Despite the fall in production, sale volumes equaled 85% of production. The low sale to production ratio of 85% highlights the continuing need for reducing production.

The stock of lots ready for sale held steady at 929 lots; equal to 7 months of trading. Stock of lots ready for sale is still too high for the local market.

Pricing

The median lot price held at $166,000. The market can afford the current price point; in fact, the market has the capacity to spend on average $178,000 per block. Pricing has never been an issue for Adelaide, population growth, concentration of estates in one area and a lack of product diversity remain the key barriers.

Outlook

The outlook for the market is for land sale volumes to oscillate around the 160 per month and for pricing to remain sub $170,000.

The embedded issue facing Adelaide is the excess development capacity relative to underlying demand. Without a major stimulus to its population base the new land sector will become more marginalised. In addition, the promotion of greater urban infill will only frustrate the viability of the new land market.

Developers doing business in Adelaide will need to consider the strategy of smaller land estates in order to overcome some of these structural and market issues.

Adelaide land sales

Adelaide land sales