1500 new apartments in Adelaide CBD by end of 2017

THE ADELAIDE CBD population is set to further increase with around 1500 new apartments to be built by the end of next year.

CBD resident Marina Mara in her apartment. Photo Sam Wundke.

THE ADELAIDE CBD population is set to further increase with around 1500 new apartments to be built by the end of next year.

Four hundred CBD apartments were completed in 2015, said David Snoswell, strategic consulting director at global property firm JLL.

“The short-term outlook in the Adelaide CBD is strong, with record levels of development approvals, large projects under construction and solid off-the-plan sales,” he said.

“Demand for new apartments may be impacted by any scaling back of stamp duty concessions for off plan sales, which is due to end on June 30 (currently up to $15,500 saving on a $500,000 purchase).”

Such savings, however, may be offset by increased investor offshore interest which has been a significant driver of demand in both Melbourne and Sydney, Mr Snoswell said.

Equally, elevated pressure on vacancy rates as more investment stock comes onto the market may increase, in turn keeping rental growth relatively subdued.

“We are also seeing increased interest from developers for higher end product in premium locations, targeting the owner occupier market. While this market has been quite shallow, recent and planned future investment in the Adelaide CBD and environs aimed at increasing the vitality of the CBD is expected to drive growth in owner-occupiers seeking a CBD apartment lifestyle,” said Mr Snoswell.

The apartment boom comes on top of a relatively stable CBD scene with 80 per cent of median sales under $500,000 over the past five years.

Gross interest rates are relatively high however, supported by low interest rates, but offset partially by job security concerns and the state of the SA economy.

“The greater Adelaide apartment market still accounts for a relatively low proportion of total dwelling stock (11 per cent of total dwellings compared to 27 per cent in greater Sydney),” said Mr Snoswell.

“The relative affordability of apartments to investors, given the considerable stock on the market for sale under $400,000, has also been an important driver of demand.

“While new supply in 2015 through to 2017 is well above long term trends, JLL is of the opinion that the increased supply reflects a maturing market characterised by greater acceptance of higher density living, and that the higher levels of activity is sustainable, at least in the medium term. This is in line with eastern seaboard capital city markets, which have seen significant growth in new apartment projects in recent years.”

Emerging hot spots outside the CBD can be found bordering the Adelaide Parklands and at St Clair, a new estate on the former Cheltenham Racecourse.

By comparison to the CBD, the number of projects and size of projects in suburban locations are relatively small.

Bowden Urban Village is the exception and is expected to eventually accommodate 3500 residents in about 2400 dwellings, primarily apartments. Development to date has been primarily 3 to 5 storeys but is set to get progressively taller.

Prospect and Kent Town are areas also likely to see a rise in apartments, added Mr Snoswell.