Adelaide's property market has surpassed expectations and this year has continued to surprise. But this level of growth may not last long, experts say. 

Casey Warner's search for a unit in Adelaide felt like chasing a butterfly that kept fluttering just out of reach. 

The 32-year-old first homebuyer started looking for a unit last December, but in three months, prices had soared by up to $50,000. 

"For one property, I offered more than the advertised price and still didn't get it. That happens frequently. I was getting priced out of the market, and it was exhausting," Ms Warner said. 

"I had to choose between a shoebox apartment in a nicer location or moving farther out."  In May, Ms Warner bought a one-bedroom unit with a patio and garage in a small complex in Salisbury East in Adelaide's north, farther from the city than she'd intended. 

"I was willing to change my location but even then, I offered $270,000 and ended up paying $316,000. Just a few months later, the unit next door sold for $350,000." 

Despite the challenges, Ms Warner feels fortunate to have entered the market when she did, especially as many of her peers feel their chances to buy a home in Adelaide have now vanished. 

"I'm on a relatively good income, so I don't know how others on lower salaries can afford it," she said. Ms Warner should certainly count herself lucky. 

The median prices of units and apartments in Salisbury East have surged by a staggering 46.6% in the past 12 months to $432,500, according to PropTrack data (house prices in the suburb rose by 21.2% to $600,000).  Home prices across Adelaide as a whole shot up 15.1% over the year to August, reaching a median value of $768,000, an increase behind only Perth, where property prices rose 23.2%. The national annual price growth was 6.2%. 

"Adelaide has been one of the country's top-performing markets over the past few years, with home prices rising almost 80% since the onset of the pandemic," said senior PropTrack economist Eleanor Creagh.  

"Over the past five years, every region of Adelaide has seen incredibly strong growth. 

"If Adelaide prices continue to rise at this pace while Melbourne prices continue to fall, we'd be on track for Adelaide values to outpace Melbourne next year," she added.  Kate Fuller, a buyer agent at National Property Buyers in Adelaide, said most people expected prices to stabilise in 2024 but the market has continued to surprise. 

"Many suburbs have achieved 10% to 15% growth this year, and many homes are selling for 10% to 20% over their advertised values, sometimes even more." 

What's driving it? 

The pandemic dramatically jolted the trajectory of Adelaide's property market, which until then had been growing slowly and steadily. 

Suddenly, young South Australians who traditionally left Adelaide for Melbourne and Sydney decided to stay. Others returned early, drawn by their hometown's attractive house prices.  "There was no outflow, so for the first time in forever, South Australia experienced a net increase from interstate migration," explained demographer Simon Kuestenmacher. "That's when Adelaide house prices skyrocketed." 

"In a small market, a few additional people can drive house prices up like crazy, and that's exactly what happened. And the market wasn't ready for it." 

Adelaide's lack of housing stock saw prices soar at dizzying speeds. The price growth turned some residents into millionaires but left others struggling, now committed to renting – though rentals have also become unaffordable for many. 

Ms Creagh said the number of properties for sale remains well below the five-year average, with new listings "quickly absorbed amid strong buy demand". 

Meanwhile the incredibly tight rental market – with vacancy rates below 1% for most of the past three years – is adding further heat, she added. "Challenging conditions in the rental market and strong rental price growth has incentivised investors and those with the means to enter the market to buy." 

Tom Hector, an agent and auctioneer at Harris Real Estate Kent Town, east of the CBD, described the market as "the biggest housing bubble I've ever seen". 

"Lack of supply has driven up house prices massively, and high demand creates panic buying. 

"Prices are increasing week by week. Adelaide's been affordable because it's been undervalued for so long." 

Private sales, traditionally dominant in Adelaide, are rapidly being replaced by auctions. As the spring selling season ramps up and properties come onto the market, Mr Hector is preparing to auction 10 homes in one day. "It's crazy, I haven't seen anything quite like this," he said. 

Investors chasing rental yields of between 4.5% and 5.5% and small developers seeking land parcels to subdivide are making it even harder for local buyers, he added. 

Ms Fuller said the price rises have weighed heavily on many residents. 

"Many people are either without somewhere to live or sacrificing other essentials just to keep a roof over their heads." 

Where's it all going? 

Experts agree Adelaide's current pace of growth is unsustainable.  

"Affordability is incredibly stretched in South Australia. Relative to incomes, home prices have reached historic extremes," said Ms Creagh. "Affordability constraints are likely to weigh on the pace of price growth." 

Nevertheless, prices are still rising, she added. "Market conditions remain strong and home prices are expected to continue to lift, particularly if interest rates lower next year." 

Mr Hector predicts a similar outlook. 

"Next year, prices will soften but they won't go down, so buying will only get harder," he said. 

He anticipates growth across "the whole of metropolitan Adelaide" in the next 12 months, with the inner southern and inner eastern corridors remaining highly sought-after due to limited supply and popular school catchments. Ms Fuller also expects prices to continue to climb. 

"Our entry-level properties and the unit market still have room to grow, along with many coastal locations that offer extremely good value compared to other cities," she said. 

"A number of large projects happening in Adelaide over the coming years will also impact property values." 

The North-South Corridor project, connecting Gawler with Old Noarlunga – a distance of 78km – is set for completion in 2031 and will hasten commute times from some outer suburbs. The Northern Connector, which opened in 2020, has already boosted property prices in the north.  Mr Kuestenmacher predicted that while Adelaide may lose some residents to other states, population growth will come primarily from immigration, which he said could reach 250,000 people over the coming years (the federal government has allocated 185,000 places to the Migration Program for 2024-2025). 

The South Australian government's Greater Adelaide Regional Plan will guide urban growth over the next 30 years, favouring infill development over urban sprawl. 

"This is the right approach from an urban planning perspective," Mr Kuestenmacher said. "There's old housing stock that needs to be redeveloped, but can they build at the required speed?"  

The city is also considering the build-to-rent model, which relies on institutional money rather than individual investors to provide housing. Mr Kuestenmacher said while migrants will continue to fuel growth in Australia's capital city CBDs, millennials will seek affordable homes for their growing families on urban fringes.  

Family homes in the middle suburbs are largely occupied by their boomer parents who are not downsizing, he added. 

While Casey Warner is now farther out than she planned, she knows moving closer would have meant settling for a smaller apartment or no outdoor space. 

"This way, I get some privacy, I have a backyard, and there's investment in the area because people can't afford to move closer in," she said. 

"I have questioned whether I was happy with my decision, but I’ll invest time and money into my place. 

"I'll make it happy."