The apartment boom - the flat market?

7 November 2001

While Adelaide's inner-city apartment building continues, experts are predicting troubled times ahead.

Above North Terrace as a symbol of the heights of Adelaide's apartment boom. Sleek, modern and containing no less than 220 apartments and hotel rooms, The Embassy is billed by its developers, Urban Construct, as Adelaide's first true high-rise residential building.

While nobody can doubt its success - all apartments and hotel rooms in the $60 million project were sold months ago - the fortunes of other developments in the CBD are now in question.

A report released last week by the Housing Industry Prospects Forum South Australia reveals that Adelaide is oversupplied with apartments and other medium-to-high density housing.

The Forum's report for September 2001 says the medium and high-density home market - which includes apartments, townhouses, units and maisonettes experienced strong growth from 1997 to late 2000.

"The upturn was reinforced by a strong pre-GST burst in approvals from mid-1999," it says.

"However, approvals have declined since late-2000 and are expected to remain lower over the forecast period (until 2003). The market is currently in oversupply."

Figures in the report show approvals for medium and high density housing peaked at 400 in the March quarter last year.

In the June quarter this year less than 150 were approved.

Urban Construct Managing Director James Rice says the city is not saturated with apartments but has been burdened with bad developments.

"Inexperienced developers have put offers together which missed the mark," he says.

"A number of projects offered to the market missed the fundamental: position, position, position.

"Badly managed projects are not an indication of where the market is."

Housing Industry Prospects Forum executive officer Ted Manka says many apartment developments were launched two or three years ago after the success of the Holdfast Shores project.

"Quite a number were being built in one hit," he says.

"At that stage the market was strong . . . but it has fairly quickly developed into a situation where the premium to high density market has gone into oversupply.

"At this stage we have to soak up the stock that's available. I would suggest that will fairly slowly diminish. You will find there will be that drift towards premium apartment dwellings in the CBD as the Adelaide City Council wants to encourage that build-up of population."

Bryan Moulds, SA executive director of the Property Council of Australia, says he is unsure whether an apartment oversupply in the city is "real or of concern".

"At the end of the day the market will reflect on that," he says.

"The CBD has enormous potential for residential development.

"One of the great things about the CBD is that it can accommodate all sorts of development, from townhouses up to more costly developments.

"But we have still not come to terms with the increasing demand for different sorts of residential living for young and old.

"It is not going to be residential house and land packages."

Mr Moulds says adequate public transport and commercial and retail activity need to be developed with residential projects.

"That's the key," he says.

"We have to stop seeing residential developments as being flats where people live while they wait to buy and move into a house. People are looking for choice, they want to move through different forms of accommodation."

Lord Mayor Alfred Huang, who told The Advertiser two years ago that an apartment oversupply could occur, does not believe there is an oversupply.

"Demand has been increasing as well as supply," he says.

However, Mr Huang says the council has a greater responsibility than ever to create a demand for apartments by making the city an attractive place to live.

"It is an important role the council is playing and should be playing," he says. Mr Huang says he believes that perceptions of an oversupply may have been created by the large number of housing projects that have been approved.

A recent Adelaide City Council report says construction has not yet begun on 2068 approved homes and hotel units in the CBD.

Mr Huang says some developments have been slow to emerge, citing The Residence in Hindmarsh Square as an example.

Construction on the luxury hotel has recently started, nearly two years after developers began off the-plan sales.

Another development which is yet to proceed is a $35 million apartment block above the John Martin's car park on North Terrace.

The development was approved by Adelaide City Council more than a year ago.

While Mr Huang disputes there is an oversupply of apartments, he admits to being worried about a shortage of student accommodation in the CBD.

"This is an area we are working very hard in. We are talking to potential developers and talking to potential investors to see whether we can get people to invest in student accommodation.

"I believe we should be actively involved in seeking developers because we have properties out there and we have influence on what sort of development we want," he says.