Despite so much bad news coming out in the South Australian market, what with the news from Holden and more recently the shut down in Wyalla, Peter Koulitzos says investors should not discount the infrastructure development happening there.
Transcript:
Kevin:  As we continue our look around Australia, this time, we’re going to have a look at South Australia. Been in for a bit of a hard time in recent times, but what’s happening ahead for the future? Joining me, a man who is commonly known as the Property Professor – Peter Koulizos.
Peter, Thank you very much for your time. Tell me about South Australia. What are you seeing there now?
Peter:  We’re getting a bit of a mixed bag here, Kevin. We’ve got bad news so far as the Whyalla Steel Mills and Arrium not going so well. We’ve also got the impending closure of Holden’s next year. But the good news is I’ve never seen so much infrastructure going on in my state in my life.
We have the new Royal Adelaide Hospital, which will be completed later this year, some major road upgrades – and number one would be the upgrade of South Road between the River Torrens and Torrens Road. There’s a relatively high number of cranes in the CBD, building public and private infrastructure. So yes, economically, the news is a mixed bag.
Kevin:  I was going to ask you what are the positives and negatives, and you mentioned a couple there. Of course, Holden closing down, we’ve known about that for some time. Recently Whyalla looks like it might be in for a bit of a tough time, almost needing a $2 billion bail-out. But isn’t it interesting, Peter, how where there has been a lot of adverse news about a lot of industries in South Australia, the federal government propping it up with a lot of infrastructure projects – which is what you’re talking about – to try and balance it all up?
Peter:  That’s right. The state and the federal government are certainly taking up some of the slack, but the perception here is that if we get the submarine contract, all will be fantastic. And if that is people’s perception that turns into a reality, then that would be lovely. It would certainly be good for South Australia, but it is not the be-all and end-all.
What we need here is a bit more consumer and business confidence, but thankfully we are sitting pretty with the federal election coming up. South Australia is a key state as far as the Liberal Party is concerned, so I would expect a few more announcements between now and July when the federal election is scheduled to be held.
Kevin:  What is the balance like in South Australia between Adelaide and the regional areas? Do you think a lot of this infrastructure development is happening in Adelaide, or is some of it being stretched out to the regions, as well?
Peter:  Most of it is in Adelaide, Kevin. The regions aren’t doing so well. They are hurting fiscally. We’ve just talked about Whyalla. In Port Augusta – which has a number of industries, but one of them is where our electricity is generated – one of the substations is being closed down because I suppose it’s good news here in South Australia, we’re generating enough of our electricity through solar panels.
Also a town nearby Port Augusta called Leigh Creek, which had a brown coal mine that was used for generation of electricity, has also had to close down. The mine shuts down, and so the whole town is closed down.
It’s a very interesting time in South Australia, but there has also been of late some very positive property news.
Kevin:  How would you describe investor sentiment right now?
Peter:  South Australian investor sentiment is okay. What’s really propping up the market, Kevin, is the interest from eastern state investors. In Sydney, for example, where the median house price is a million dollars, it is very hard to buy an investment property in Sydney because you need to fork out several hundred thousand dollars. But you come to some very lovely areas here in Adelaide and $250,000 to $300,000 will get you a two-bedroom [4:07 inaudible] unit very close to the city, or even $300,000 to $350,000 will get you a house on a decent block in the Brisbane equivalent of Redcliffe or Woody Point.
There is a lot of interest. I know there are a number of buyer’s agents buying for their clients in Adelaide, and there are also a lot of people off their own back either coming to Adelaide and looking for property or just buying sight unseen off the Internet.
Kevin:  That draws me to my next and probably final question, too, Peter, if I may. What are some of the areas you think are good buying right now, let’s say in Adelaide, and what are some of the areas that you would avoid?
Peter:  The good areas: I would stick to the inner western suburbs like Mile End, Thebarton, Torrensville, Cowandilla, Hilton – they’re all at various stages of gentrification. To that mix, I would also add Croydon and West Croydon. A prospect that is also close to town just on the northern edge of the CBD is also a good prospect so far as investment is concerned. Or you look at some of your coastal suburbs. Australians and Adelaide people in particular, are very keen on lifestyle and in particular, lifestyle by the sea, so our coastal suburbs are also doing very well.
Areas that I would avoid at this stage for the short to medium term would be areas around the Holden plant, in particular around Elizabeth and Salisbury because even though it won’t be the end of the world – because we’ve had car manufacturers close down before – it will have some impact on the local property market and the local economy, so prices will probably drop a bit and rents will probably also drop a little bit.
Kevin:  PropertyProfessor.com.au is where you’ll find Peter.
Peter, thank you so much for your time and that insight into the Adelaide market.
Peter:  Thank you very much, Kevin. My pleasure.