A shortage of supply coupled with growing demand for student accomodation in Adelaide make appropriate homes in this highly liveable city a good option for investors.

Adelaide is an excellent location for students seeking a tertiary education in Australia. The capital city of South Australia, Adelaide offers three internationally renowned universities, excellent accessibility and the lowest cost of living of the mainland state capital cities.

The huge growth Adelaide has experienced in international student numbers over the past few years has provided an excellent opportunity for investors to purchase real estate aimed toward the needs of this rental market. The local rental market is currently in a state of under-supply for accommodation suitable for I these students, particularly in regard to the desires of parents overseas, wanting to ensure that their son or daughter is housed in a safe, secure and supportive environment during the university semester.

The chart below ( fig. 1 )shows the median sale price and number of sales recorded for all units in Adelaide in each six month period between 1994 and June 2004. The unit market in Adelaide has experienced mild capital growth over the past 10 years with an average cumulative growth rate of 5.5% (shown by the fitted trend line) between the 6 months to June 1994 and the six months to June 2004. Interestingly, the sales cycle shows a noticeable peak in median sale price in the December half of each year (except 2002), regardless of sales volumes achieved.

(fig 1)

Sales volumes in the Adelaide unit market experienced overall growth throughout the 1990s, accelerating after the year 2000, although a decline was experienced in the first half of 2004, along with a correction in the median sales price to $235,000, compared to the peak of $262,900 in the December half of 2003. This peak in December 2003 appears to have been caused by 132 settlements of superior quality serviced apartments at 102 North Terrace, while the reduction in the median sale price for the half year to June 2004 may have been skewed to a large number of sales of lower-priced apartments. In particular, apartment sales in South Terrace, King William Street, Gouger Street and Hindley Street appear to be at very low price points for this half year.

The chart below ( fig. 2 ) compares the proportion of unit sales in Adelaide occurring within selected price brackets between the 12 months to June 2003 and the 12 months to June 2004. As can be seen, there was a strong reduction in the proportion of units sold under $200,000 in the year to June 2004, particularly in the $150,000 to $200,000 range. The largest increase in proportion was seen in the $200,000 to $250,000 range, while increases were also observed at all higher price levels. The shift upwards in pricepoints could be partly attributed to the increase of new apartment stock available in Adelaide as well as an increase in demand caused partly by the influx of students into the market.

(fig 2)