It seems Adelaide developers have joined their east coast brethren by offering generous incentives to buyers of house and land packages. From Adelaide Now:
State government grants and record low interest rates are starting to have an impact, with Housing Industry Association figures revealing new home approvals in South Australia increased by 1.7 per cent in December last year.
But developers are still throwing in everything – including the kitchen sink – to capture the customer’s dollar…
Dechellis Homes and Rossdale Homes are offering customers $10,000 towards their new home and people who sign up with Sekisui House Australia can pay an extra $999 for a 2013 Mitsbuishi Mirage valued at $14,000 or a Japanese holiday valued at $11,690.
Fairmont Homes is throwing in free evaporative airconditioning with their homes…
HIA South Australia director Robert Harding said the different incentives had been introduced to help boost the struggling construction sector.
“Obviously builders and developers are trying to make sure they keep their level of work up so they can retain their staff and subcontractors.
“I don’t think it is surprising that we are seeing these (incentives) happening.
“From a consumers’ point of view, when you look at what is on offer, there has probably never been a better time to be involved in the residential, new construction market”…
Last year, Premier Jay Weatherill announced changes to the First Home Buyers Grant to provide up to $40,000 for home builders in a bid to stimulate the construction sector.
While the article attempts to put on a positive spin, the fact remains that the market for new homes in South Australia is sick. Despite the incentives on offer from developers, in addition to generous first home buyer subsidies provided by the state government, dwelling approvals are tracking nearly -20% below the long-run average, according to the Australian Bureau of Statistics (ABS):
In a similar vein, the latest Housing Industry Association (HIA) figures show that new house sales in South Australia hit 15-year lows in December 2012 on a rolling annual basis (see next chart).
One likely reason for the sluggish rate of new home sales and construction is that fringe vacant land prices in Adelaide are the third highest of any major capital city on a rate per square metre basis, due mostly to Adelaide offering the smallest average plot size (i.e. only 375 sqm):
Adelaide looks like another example of where land prices remain well above what many buyers can afford or are willing to pay, which is holding back sales despite generous incentives on offer from both developers and the state government. Until land prices deflate, the rate of home sales and construction activity is unlikely to rebound materially, leaving South Australia’s developers and home builders whistling dixie.
unconventionaleconomist@hotmail.com
http://www.adelaidenow.com.au/business/adelaide-builder-mccracken-homes-ceases-all-projects-stops-trading/story-e6frede3-1226585333699
Aint just lightning in the distance anymore….. the gale is building now
Thanks for looking at Adelaide. We’d love to build a new home, but land in the area we want to live in is so expensive, almost $100,000 per 100sqm. Plus there would be the worry that the builder would go bust half way through!
Contact the Master Builders assn of SA – I think that you will find that home owners have insurance cover to protect you from builders who falter or whose work is substandard.
Scrap the advice above. Continue to rent, it is the best form of insurance to protect you from builder insolvency at this point in time.
Don’t be so pathetic rusty, I was answering the question on the builder aspect.
why is the news always lying to us? :O
I thought Adl was actually negative population growth.
Just a suggestion …maybe bulldoze some suburbs and put n some vineyards
District 6 Shiraz.
Adelaide is one more example of speculative property market driven solely by easy credit and speculation. Population is stagnating, household formation falling but house prices sky-rocketing. Current construction rate in SA is by far largest in Australia and somehow there is a shortage that drives prices up.
There is no need to develop any additional land in Adelaide to provide more than enough housing for everyone but prices are still going up. Why?
Same reason as in Manchester UK or Baltimore US – easy credit and speculation
Having spent some recent time up in Qld (home of the debt pig tradie) – i am actually starting to wonder (contrary to my recent ranting) whether the debt boom will go again.
There just doesn’t appear to be the will to leverage up there once was – Qld like Perth was notorious prior to the GFC? Maybe the punters are actually saying we got out by the skin of our teeth last time and we’re just not going there again.
Once bitten…
aj
It is too late for some to learn that lesson.
We rent a house in the beach suburbs of Adelaide that sold in 2010 for near $750K to a couple in their late 20s/early 30s. They can no longer afford to stay and rent a cheaper house 3 blocks away while we pay them 4% of the capital value to rent. A bit on the high side for rent but fine for the summer.
Just up the road friends recently offered $685K on a beachfront house advertised at up to $925K and the offer was accepted!
There is already substantial financial pain out there.
With McCraken bust, word is that there are quite a few other builders on the verge as well.
Would not be surprised if the govt extends this grant until 2014 as a lolly for the electorate and for the developers that fund the ALP