The Adelaide residential market has been out of sync with the rest of Australia for the last 3 decades and that is not going to change. Whilst the eastern seaboard markets pull back from a 5-year boom, Adelaide is getting ready to take off.
The Adelaide market began from a factor of 100 in 1989 to be still at that level in 1999 but then it rocketed to 250 in 2008. The GFC was the start of another lost decade and by 2017 had only reached a factor of 265. By 2020 I predict that to climb to at least 300 representing growth of 12-15% with the residential market in Adelaide rising across all sectors.
As Professor Julius Sumner Miller would ask “Why is it so?”
Firstly, we are now at the end of our second lost decade in less than 30 years and it is time for a catch up. Hobart is rising significantly for no better reason.
Secondly, the problems associated with Holden are now archived and hopefully forgotten.
Thirdly, with the change of Government for the first time this century there has been a notable shift in comments and levels of confidence.
Fourthly, key stakeholders are now investing in South Australia. Sanjeev Gupta is well and truly reinvigorating the Iron Triangle and today his initiatives of a massive power generator have been supported by the State Government announcing a new super school to be built for 1500 students in Years 7-12.
If you want something done “You’ve Gotta Get a Gupta”. How lucky are we to have one already.
Fifthly, copper exports will double from current levels of 145,000 tonnes by 2020 sourced from the upgraded Olympic Dam and the new mine at Carapateena. This will present significant royalty income to the Government coffers.
Sixthly, the submarine/frigate contracts will be in full force by 2020 giving many good reasons for expat South Aussies to return home to job opportunities that have been denied to them for the last 15 years.
Seventhly, Sam Shahin should become the new sponsor of the Adelaide 500 and base it at his racetrack at Tailem Bend. This will put an end to the disruption to the eastern suburbs from November – April and save the Government $8m p.a. forever.
Eighthly, the wine industry is back to its original boom time form with exports increasing at better than 20% p.a., the catalyst being Chinese demand which is nowhere near to being sated. The growth in the mining and defence sectors will encourage a higher level of migrant settlements in South Australia which will add to consumption of all things and the expanded world class Convention Centre Complex is performing above budget.
And finally, there’s always the counter cyclical effect of the downturn in Melbourne and Sydney which will drive investor interest into our very cheap residential market.
On the negative side we have to deal with the discovery of the Greek style economic policies of the previous Government, particularly as it relates to the financing of the nRAH and the bloated Public Service.
And be ready for a Federal Labor Government next year which will challenge the current attitude to negative gearing and capital gains tax. You have been warned before.
Time now to look at new opportunities for S.A.
Let’s develop the world’s first autonomous, electric-motored mini bus public transport system in Adelaide. Within the next 10 years, one can imagine that the current road-clogging tandem bus network that only fills up for an hour at the start and end of each work day will be replaced by a dial-a-bus facility that will pick up patrons from their doors in buses a third the size and run at half the cost and be full most of the time. Tonsley Technology Park is already running with this idea, so the autonomous bus should be considered on a bigger scale that will allow Adelaide and Sajeev Gupta (perhaps) to produce these vehicles in the old tin shed of Holden at Elizabeth.
Another sector that has exponential growth prospects is the development of a more efficient, higher capacity battery for power storage. Remember the first computer that used to be stored in a room with filtered air conditioning to now where we all have one in our back pocket.
And finally, as a point of difference, we need to re-work our property-based taxes to exclude Stamp Duty on residential properties, Land Tax on all properties and the ESL. To the total revenue generated from these three taxes should be added the annual cost of funding the nRAH and divide that figure over every single property title based on its site value. For example, if the revenue needed from the above totals $10b and the grossed-up value of the site values of every title in S.A. totals $100b, then a rate of 10cents in the dollar would be applied to the site value of every title to be paid by the registered proprietor every year as a Property Tax. With the change of Government comes the opportunity to reset our financial base.
I know I have ranted on about this before, but no one has come to me with a better idea so I’m going to iterate the principles once again, and hopefully for the last time.
The elimination of stamp duty with a single Property Tax would save millions in Government grants to first home buyers to assist them into home ownership. Grants never end up in the hands of the intended beneficiary. For example, when governments realised that they couldn’t afford to continue funding the ludicrous idea of subsidising solar panels, the cost dropped by 65%. It would also mobilise the residential market where Baby Boomers in oversized homes would sell up and this would add supply to a frozen market that would ripple down to first home buyers and everyone would be a winner.
A single Property Tax would eliminate the basic assumptions that have driven property taxes for the last 4 decades, they being, prices never fall and turnover never drops. We in South Australia have experienced two decades in the last three where prices have fallen by as much as 20% and turnover currently is down 40% from its pre GFC levels. How on earth can a Treasurer present a credible budget when 40% of the revenue is based on assumptions that are simply wrong. The administration of a single Property Tax would save even more millions by cutting into the unaffordable cost of a bloated Public Service.
We would be the first State to make the move and the point of difference would add further good reason to draw expats with high end qualifications back to S.A.
For the next 18 months, the stars are going to align in South Australia. Residential property relies on confidence and job security and for the last 10 years that has been sadly lacking. There is light at the end of the tunnel and people are starting to talk about it and in time that will convert to actions.
As big Kev used to say, “I’m excited”.