The 2025–26 South Australian State Budget, announced yesterday, presents a landscape of cautious optimism for property developers and investors. While major new incentives are limited, several policy shifts and ongoing initiatives offer opportunities and considerations for both commercial and residential sectors.
Residential Development: Expanded Land Supply
A significant development is the removal of Environment and Food Protection Areas (EFPA) and urban growth boundaries, unlocking approximately 61,500 new homes across greenfield estates. Key areas include Two Wells, Roseworthy, Murray Bridge, Victor Harbor, Goolwa, and Middleton. This move aims to address future housing demands, with projections indicating the need for 315,000 new homes over the next 30 years.
While this expansion offers substantial opportunities for residential developers, it also raises concerns among local councils and agricultural bodies regarding the loss of prime farming land and the adequacy of infrastructure planning. Developers should anticipate potential requirements for significant investments in infrastructure, including water supply and healthcare services, to support these new communities.
Commercial Property: Stability Amidst Infrastructure Investment
The budget maintains a focus on major infrastructure projects, such as the $15.4 billion South Road upgrade and the $3.2 billion Women’s and Children’s Hospital. These projects are expected to stimulate economic activity and may present opportunities for commercial property development in adjacent areas.
However, the state’s projected debt reaching $50 billion by 2028–29 necessitates careful consideration. While the government assures that the debt is manageable and has not introduced new taxes, developers should remain vigilant regarding potential future fiscal measures that could impact the commercial property sector.
Taxation and Incentives: Limited New Measures
The budget does not introduce significant new taxation measures affecting property developers and investors. However, the government continues to support the Small Business Strategy, allocating $6.5 million over four years to empower small and family businesses.
Developers should also note the ongoing discussions and proposals related to affordable housing requirements in new developments. While specific changes were not detailed in this budget, staying informed on policy developments in this area is advisable.
Interest Rates and Financing Conditions
Interest rates have been a significant factor influencing the property market. As we move into 2025, there is optimism that interest rates will stabilise, restoring confidence among buyers and encouraging market activity. Lower or stable rates mean more affordable borrowing, encouraging first-home buyers and investors to re-enter the market.
However, it’s important to note that while interest rates may stabilise, the broader economic environment, including inflation and construction costs, will continue to impact financing conditions. Developers should factor in these variables when planning new projects.
Investor Sentiment and Market Outlook
Investor sentiment in South Australia remains strong, with the state recording the highest confidence index scores in Procore/Property Council of Australia’s March 2025 industry sentiment survey. Confidence rose by 9.3 percent to 141 points, surpassing other states.
This optimism is reflected in the continued growth of property values. According to PropTrack, South Australian home values have seen substantial growth, with regional property prices increasing by 11.83% and metropolitan prices by 11.04% over the past year. Adelaide’s combined dwelling prices rose by 0.52% in the past month, reaching a median of $805,000, up from $748,000 in June 2024.
Despite high prices, homeownership continues to be seen as a solid long-term investment, attracting both local and interstate investors.
Strategic Considerations for Developers and Investors
- Infrastructure Alignment: Evaluate opportunities in regions benefiting from major infrastructure projects, considering potential increases in property values and demand.
- Regulatory Environment: Monitor ongoing policy discussions, particularly those related to affordable housing requirements and potential taxation changes, to assess their impact on development projects.
- Risk Management: Given the state’s increasing debt levels, maintain a cautious approach to investment, factoring in potential future fiscal measures that could affect the property sector.
Conclusion
The 2025–26 South Australian State Budget offers a stable environment with targeted opportunities for property developers and investors. While it lacks significant new incentives, the expansion of land supply and continued infrastructure investments present avenues for growth. Developers and investors should remain proactive in monitoring policy developments and aligning their strategies accordingly.
For a discussion on how these budget measures may impact your personal property development or investment plans, contact us.
