I have been contemplating writing a book titled “All in a Day’s Work” with anecdotes of my experience over 35 years as a real estate agent. To kick off this blog, I include an anecdote that goes back to November 1984.
In the period 1982 -1985, Adelaide residential real estate doubled in value. In 1982, P.M. Fraser and Treasurer John Howard “trumped up” a mining boom that set the residential markets in Queensland and Perth alight, however, with the oil crash of 1983, those markets collapsed and by late 1984, property developers in Perth were going broke. This opened up a fantastic buying opportunity for Adelaide investors and I teased the enthusiasm of the local market to investigate further with the headline “REMEMBER ADELAIDE PRICES OF TWO YEARS AGO, THAT’S PERTH PRICES TODAY”. Well, the phone ran hot and from November 1984 to May 1985 we purchased 208 units and flats for a gross value of $7,800,000 for ourselves and Adelaide investors. We made 7 sorties into Perth buying an average of $1m worth each time.
On one occasion, a very “English” local agent met us at the airport dressed in a Prince of Wales check suit, a Guy Mitchell blue accoutrement in the top pocket and a lengthy moustache that was once black but now well greyed. He drove a vintage 1952 Rolls Royce and as we waited to exit the carpark he leant over the front seat to us in the back and remarked “you know, we all think you’re a pack of idiots.” To which I replied “drive on Sherwood, you can’t even see the wood from the trees.”
The reality was we were selling 2 bedroom flats in Homer Road, Clarence Park for $46,000 and buying the same in Mount Lawley, 5 kilometres east of the Perth CBD, for $25,000. So, the next ad in the Advertiser read “TWO FOR THE PRICE OF ONE.” Within less than 30 months our $7.8m portfolio was worth $15m. Ah! The good old days. Fast forward to today and we have a very similar scenario where it is difficult to get local investors excited about the Residential Market and yet evidence abounds that suggests that the markets are rumbling. Here’s an example; I opened a property at 4 Strathmore Grove, Urrbrae for two x 30 min opens and had 51 attendees and ended up with 12 offers and three of those were above the top of the range. That’s a market that is rumbling. We must be careful however to recognise that the market is not as exuberant in all asset classes.
Buyer Agents from Melbourne are now buying Adelaide property for the 1st time since 2002.
Three and four-bedroom family homes are hot to trot. The stepping stone affect from one home to a larger one is now not as obvious as it used to be and accordingly the frequency of buying and selling is much less. This ultimately results in a lack of supply and over time the pent-up demand builds to a point where it breaks out and results in what we saw in the property at Urrbrae. The other sector that is hot is the small character cottages either in or very near to the city. Again, it is a matter of underlying demand exceeding supply due to the focus on the CBD with the new RAH and the Adelaide Oval complex.
The neglected sectors are the dated units and flats (built c. 1970-1985) that are finding it difficult to compete with the new glitzy high rise that is going up within the CBD. Sooner or later this type of property will become a fantastic investment particularly if you have access to good quality trades that do not over charge for their work. If you don’t, then call me.
So far this year we have upgraded 13 units and townhouses for our property management clients, some of which have sold, most have been retained. The outcomes have been consistent – pre-upgrade valuation + 2 x upgrade cost = sale price. On the rental side, upgraded properties achieve rent increases of 10-15% of the upgrade cost but more importantly, these properties are renting in half the time of those that are not upgraded.
Looking further out it is not difficult to see that by as early as 2020, the South Australian economy will have a more positive complexion. We are well on track by 2020 to being the largest copper producing state in the Country at around 30% due to the massive investment at Olympic Dam (BHP) and a new mine to be developed by Oz minerals at Carrapateena. Our Gawler Craton is the world’s largest mineral deposit in Cu, Ag and U. In addition, the Frigate Contract is going to be employing up to 7000 highly qualified personnel none of whom live here yet. This will lift the top end of the market in both sales and rentals.
So now is the time to start looking for that tired and forgotten two-bedroom single level home unit that is ready for a makeover. We can give you qualified buyer advice and then undertake the task of project managing the upgrade process utilising our fabulous team of trades that we have developed over the last few decades. We don’t charge for this service but we do get a kick out of seeing people improve their current position and take advantage of a market that has been ignored by too many for too long.
ARE YOU READY TO RUMBLE?