Billions worth of private construction projects show Adelaide is finally growing up

FROM all sides of the CBD, cranes adorn the city skyline – a visual sign of growth and confidence from the private sector in the South Australian economy.

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ADELAIDE is finally growing up.

From all sides of the CBD, cranes adorn the city skyline – a visual sign of growth and confidence from the private sector in the South Australian economy.

Since the redevelopment of Adelaide Oval on the northern side of the River Torrens, there has been unprecedented construction around the Riverbank precinct.

But it is no longer just the work of the State Government and institutions. Residential apartments, student accommodation, and commercial buildings are popping up across the city.

This year, the heart of Adelaide is expected to boast an even greater mix of high-rise and heritage buildings.

Almost a decade since the state began assessing developments of more than $10 million in the CBD, 30 projects worth $2.95 billion have been completed and a further 37 worth $2.06 billion are under construction.

In 2012, Planning Minister John Rau spearheaded changes to policies to stimulate investment and new housing in the CBD which, in turn, was expected to attract more people to live, work, invest there.

“If you look around the city today, the majority of cranes in the sky are privately funded,” Mr Rau says.

“In fact, of the 67 completed or under-construction projects in the city, 60 are privately-funded and seven are government-funded.”

An RBL Crane Index document confirms that crane numbers in Adelaide have been steadily increasing since a recorded low in the second quarter of 2015.

Seventeen cranes were in operation across Adelaide in the fourth quarter of 2017 – an increase of two following construction beginning at the West Franklin apartments, Kodo on Angus St, Synagogue Place student housing, and United Communities in Franklin St.

Many of the developers with projects now underway were enticed by the government’s rezoning of the city.

C Projects director Stephen Connor last year received approval for a $70 million luxury apartment building on the corner of East Tce and Rundle St.

Monument is a joint venture with the landowner, Singapore-based financier Mark Ebbinghaus.

Mr Connor said the demand for apartments was shifting as demographics, lifestyle and investment drove people towards the CBD and there was “a bit of competition around”.

But the most difficult part in getting projects off the ground is the banks, according to Mr Connor, because of pressure put on them by financial services regulator, the Australian Prudential Regulation Authority.

“There are a lot of projects that will not get out of the ground because it’s very difficult for people to achieve the required pre-sales to get their finances approved,” he said.

Mr Connor says it is fortunate his partner is able to bring capital and invest it back in South Australia because the Weatherill government’s foreign investor tax would drive many elsewhere.

In last year’s Budget, Treasurer Tom Koutsantonis announced a new $10,000 pre-construction grant for contracts signed until September for off-the-plan apartments in buildings yet to be built.

An artist impression for the Adelaide GPO Development. Picture: Supplied

The initiative to encourage prospective buyers and push developments into construction phase was praised by all – but its success remains unknown.

But in the same Budget measures bill, a conveyance duty surcharge on temporary residents and foreign buyers of residential property was also introduced.

The four per cent surcharge came into effect on January 1 in SA to reduce the risk of foreign buyers driving up prices and create housing affordability issues seen on the east coast.

Michael O’Neill, the SA Centre for Economic Studies’ executive director, says he doesn’t see a problem with “Chinese investment or US or UK investment … developing a new hotel or a new 10-12 storey block of flats”.

“The development of student accommodation is supporting an over $1 billion international student industry into SA,” he says.

“Foreign investments, interstate investments, or large superannuation – all of those are potential investment bodies in to property development in SA.”

Mr O’Neill says several government policies are giving confidence to the private sector, including the Commonwealth’s approach to superannuation which will free up housing as baby boomers downsize.

“People at retirement age can sell their principal place of residence and put $300,000 into their super, which starts July 1,” he says.

Lord Mayor Martin Haese says one of the council’s key targets is to grow CBD resident numbers to 30,000 by 2025.

“Providing people with quality apartment living options is a great way to help achieve this,” he says.

An artist impression of Frome Central Tower One. Picture: Supplied

The plan for 2-6 Hutt Street, Adelaide. Picture: Supplied

Australian property market expect Dr Timothy O’Leary says tens of millions of dollars worth of major, publicly-funded projects such as the new Royal Adelaide Hospital, Convention Centre, and the tram extension had generated a lot of construction and jobs.

But in terms of the building cycle, “there isn’t too much more to replace that” – aside from the Festival Theatre works, Walker Corporation development, and Casino upgrade.

“The credit card is a bit maxed out,” he says. “There are ambitious plans of course for the old Royal Adelaide site but that requires private investors to come in.”

UniSA property lecturer Peter Koulizos says investment from the university on Hindley St, between West Tce and Morphett St, has transformed that corner of the city.

“There is gentrification happening in pockets around the CBD but the one that is probably the most striking is in the north-west area,” he said.

“We have been the laughing stock of the nation because we’ve just been considered a large country town but now, when you fly into Adelaide, you’re seeing lots of cranes, lots of taller buildings.”

However, he fears there will be an oversupply of apartments because Adelaide is an affordable capital city.

Slow population growth driven by an ageing population and negative interstate migration, especially young people, was also not helping.

But Property Council SA executive director Daniel Gannon says “that doesn’t mean we should apply a handbrake on residential supply”.

“SA’s biggest challenge moving forward is around demand and growing our state’s population,” he says.

“It means we need to work harder to attract more people and more investment.

“As the state’s biggest private sector employer, the property sector has the potential to drive a jobs boom, but to make that happen we need competitive and resilient policy settings.