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Adelaide's Surge: How Record Immigration is Driving Property Prices to New Heights

The latest immigration data has been released and it shows that immigration into Adelaide has hit a new record with over 8,000 people migrating to the city in the first quarter of 2023. In this blog post, we will explore trends in immigration to SA and what they could mean for house prices in the coming years, including the specific areas in Adelaide where immigration will have the greatest impact.

Background on South Australia's Immigration Trends

Immigration to South Australia was steadily increasing year on year until the interruption caused by the COVID-19 pandemic. From 2010 onwards, the SA government introduced policies to attract more skilled migrants to the state, in the hope of increasing population growth to levels seen in the other Australian states. They were successful at increasing net overseas migration and by the end of 2019, almost 20,000 migrants moved to Adelaide. This was amidst a backdrop of higher immigration across Australia as the Federal Government was also introducing supportive policies to boost the skilled migrant intake.

Record Levels in March Quarter of 2023

Immigration paused in 2020 as borders were closed and net migration turned slightly negative for a 3 consecutive quarters. Since lockdowns eased and the borders reopened, migration into SA has surged to record levels. On average, migration is running at levels 50% higher than the pre-COVID trend and there is no indication that government policy will shift to slow this momentum in the coming years.

A key catalyst for this jump in net overseas migration was the unprecedented announcement last year by the new government to lift the permanent migration intake cap to 195,000 for the last financial year. This move was intended to address labour shortages that were at risk of driving a wage-price inflation spiral, and has been successful at easing these pressures. This policy change added to the existing momentum that was already driving net migration into Australia, largely due to the economic opportunities, excellent educational institutions and quality of life associated with living in the country.

Impact of Immigration on Housing Demand

In the context of South Australia, an increase in immigration typically correlates with a heightened demand for housing. As more people settle in SA, there's a natural surge in the need for housing—whether it's renting or purchasing homes. This is especially pronounced in large cities like Adelaide where job opportunities, schools, and amenities are concentrated. The resulting demand typically leads to a rise in property values and rents, as the supply of available housing struggles to keep pace with the influx of immigration. In areas like Adelaide, where housing supply might already be constrained, significant immigration can create pressures that ripple through the entire housing market.

A number of studies have estimated the impact of a 1% increase in population in a given postcode to correlate to around 0.6-0.8% rise in house prices. Typically this occurs with a lag as new migrants won't purchase housing immediately but more gradually as they find employment and save a sufficient deposit.

Projected Impact on House Prices

If population growth is expected to have a material impact on property prices, then where is population growth expected? Official SA Government growth projections point to Adelaide’s north – comprising the Salisbury, Tea Tree Gully, Playford and Gawler councils – as the area that will experience the fastest population growth in the coming decades. Population in this area is expected to jump from 470,000 today to nearly 600,000 in 2041 with extensive options for future development particularly around Playford, Buckland Park, Gawler, Two Wells, Angle Vale and Roseworthy.

As the population swells in Adelaide’s north, infrastructure investments will be essential in ensuring the area remains an attractive place to live, and these developments have already had a direct impact on local housing prices. Upgrades to transport infrastructure, such as the $867 million invested in the Northern Connector upgrade, will continue to be rolled out and public transit options expanded to increase accessibility and connectivity with central Adelaide, making these suburbs more appealing to potential residents. Investments in utilities, such as water systems, power grids, and broadband, will further strengthen the area's appeal, particularly to younger buyers looking for large but affordable homes. The development of new schools, health centres, parks, and community spaces has enriched the social fabric of the region, while investments in commercial infrastructure have enhanced job prospects and contributed to local economic growth.

Implications for Residents and Investors

With population growth being a key determinant of future house price growth, Adelaide's northern suburbs offer an enticing investment opportunity, characterised by strong population growth, significant infrastructure development, and promising economic prospects. This nexus of factors is already yielding considerable returns for investors through capital appreciation and high rental yields. The expected continuation of these trends, supported by government growth projections and ongoing infrastructure investment, underscores the suburbs' potential for sustained property value growth. Hence, savvy investors seeking long-term returns should consider Adelaide's northern suburbs as a fertile ground for investment.

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