Invest Outside The Box

Posted by Daniel Joseph

I spoke with a couple of Adelaide based finance professionals yesterday and the conversation naturally turned to the Adelaide property market, and, more specifically, our aversion of it.

Life is governed by the choices we make, and, with a finite amount of resources, it’s important we make the right ones. More often than not, however, investors make the wrong choices when it comes to property investment out of fear of the Unknown. Better the devil you know, indeed.

Although this philosophy may serve some evolutionary purpose, it’s most certainly a hindrance when it comes to investment.

Our aversion of Adelaide is not driven by a belief that investment will not bear fruit, rather that investment elsewhere will bear more. In the past decade, you would’ve been better off investing in Sydney, Melbourne, Brisbane or Canberra than you would have had you invested in Adelaide.

There are 3 key points that will likely stifle the growth potential of Adelaide property in the medium term:

Unemployment rate 21% higher than the national rate

Economic growth and job creation below national levels

Population growth below national levels

Given that price growth is fundamentally a product of a demand heavy imbalance , the environment I point to above is likely to constrain positive price movement in the medium term. That doesn’t mean that Adelaide (or other markets for that matter) can’t/won’t present an opportunity in the future, what it does mean is that at this point in time, better opportunities exist elsewhere.

What you choose to do with your finite resources at this moment has a material impact on your future. Had you invested in a $400k asset in Sydney in 2005, you would’ve had $130,000 more of a capital gain than you would’ve had you invested in the same value asset in Adelaide.

Posted by Daniel Joseph, on 30th Aug 2016