SA Is On Its Way

2019 is going to be a year of continuing disruption starting with the final report of the Banking Royal Commission on 1st February, hopefully a resolution to the China-U.S. trade deal by March and then a Federal Election with a new Government in May. But whilst all of these matters are being resolved, South Australia is set to rumble.

In order to present the most optimistic picture for Adelaide home sales, I have researched the Bungalow style home on lots ranging from 650-900m2 in Colonel Light Gardens. This homogenous grouping has been well supported since the GFC by second time home buyers and it is this sector alone that has allowed the housing index for South Australia to be positive whilst every other sector has been flatlining. I have overlaid the chart for house sales in Australia in order to get the largest sample possible which in turn eliminates erratic movement and distortions.

 

The chart shows the perfect alignment between CLG and Australia for the period 1993-2008. For the first 5 years since the GFC of 2008, the Australian market did not move at all but then went into an upward trend due to the Chinese influence in the Melbourne and Sydney markets. Clearly, South Australia is the laggard in the Australian house price profile but you cannot be a laggard forever, particularly now that we have had $100b worth of Federally funded contracts announced in the latter part of 2018. These major projects, covering the sectors of Mining (Olympic Dam and Carrapateena), Defence and the Space Academy, have decades of life that will underpin the South Australian economy. Add to that the regional influences of the Whyalla Steelworks and the recovery of the wine export market into China, and it’s easy to get excited about the prospects that are nigh upon us.

House prices in Australia have compounded at 6.8% p.a. over the last 25 years in comparison to only 6.2% in South Australia. The median house price in Adelaide is now the lowest of any capital city in Australia – and that includes Hobart. If the sum of the parts that make up our local economy synchronise at any stage in the next few years, then we are in for boom times of massive proportions. Let’s just think about what will happen.

By April this year, the Holden story will have completely resolved with 6 new businesses operating with 1250 new jobs in the old Holden site at Salisbury. By June, the two biggest copper mines in Australia will be fully operational and contributing royalties to the coffers. By the end of this year, the Frigate contract will be up and away with more top end jobs available. The Space Academy is big, particularly when you realise that the focus of NASA has moved from the Moon out to Mars. International competition in this sector is now building and China is going to be a major player. Our low Australian Dollar is guaranteeing our competitive edge in delivering premium product to international markets. Let’s hope next year’s grain harvest is a ripper.

Whilst residential property prices in South Australia have averaged 6.2% compounding annually over the last 25 years, that took into account a State Bank disaster that crippled the decade of the 1990s and an inept Labor Government that frustrated everyone’s aspirations for the decade since the GFC.

With the next 25 years locked away with $100b of Federally funded projects, a 6.2% growth rate is guaranteed. Here’s the prediction. Property prices will double by 2030. Not only that, South Australia will be rid of the narrow minded myopic tunnel visioned cynics who live in a world of yesteryear and gone too will be the ratbaggers from interstate who keep insisting that South Australia is a drag on the Australian economy and is best known as a backwater. But isn’t it in backwaters that you build submarines and frigates.

I’m bristling with excitement because I cannot see any chance that Adelaide is not about to embark on the greatest era of growth and prosperity since the Playford era of the 1950s. Two years ago, I suggested that the State needs a Messiah. Well, I don’t know who it was, but it has happened so now all we have to do is stoke it with a decent dose of enthusiasm and hard work to ensure that the future is ours to enjoy.

Wishing you all a Happy, Healthy and Prosperous 2019 and beyond.

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