Current Issue #488

Montefiore: Adelaide’s Apartment Boom Doesn’t Keep Pace with Reality

Montefiore: Adelaide’s Apartment Boom Doesn’t Keep Pace with Reality

An Adelaide apartments boom ending with a tower vacancy glut in the lead-up to the March 2018 election? Not a good look. No wonder the state Labor government has been throwing stamp duty discount offers at potential buyers.

A recent straw poll among Sir Monty’s peers at the Adelaide Club concluded that our fair city should be rebadged – City of Plenty. But not for reasons you might think.

Under their wise old property industry gaze is Adelaide’s glut of half-empty apartment and hotel towers at the same time as more are due for construction. While local industry folk are ominously quiet about the bleeding obvious, an early 2016 warning emerged from a JP Morgan report, which noted a national oversupply of 70,000 apartments. Other equally reliable reports followed, some claiming higher figures.

Walk city streets at night and the unlit windows in Adelaide’s mushrooming new towers say it all. City real estate folks must be tired of trying to pump up another exciting ‘off the plan’ marketing promotion for yet another tower of glass, driven by speculative or fleeing overseas money.

SA Government bureaucrats who created and championed that dubiously speculative 2009 30-Year Plan for Greater Adelaide just in time for the 2010 election are reluctant to admit that they simply made up population growth targets.

Planner pals of Sir Monty tell him that they also needed those grossly inflated numbers to justify massive changes to the city planning rules, to accede to the development industry’s demands to approve towers of unprecedented scale and height in and near the city. One justifies the other – that’s how SA politics works nowadays.

Since 2012, more than 4,200 new apartment dwellings have been approved – encouraging a glut because the vacancies overwhelm actual city annual population growth of fewer than 800 – many of whom can’t afford or don’t like apartments. Put into context, where a 2002 Town Hall growth target was 34,000 by 2010, the city’s most recent tally (June 2015) of 23,169 shows how tardy growth has been (up only 479 on the previous year). It highlights how illusory was the government’s 2014 target of 50,000 by 2024.

More widely, an ABS/UBS graph published in June 2016 showed a huge, historically unprecedented spike in post-2008 erection of new, Australian multi-storey buildings (by comparison to houses), especially Brisbane, Sydney and Melbourne – and you only have to look across Adelaide’s inner city skyline to see how a flood of overseas money also has randomly scattered ill-placed, out-of-scale new towers across our CBD and frame districts.

Fuelled by planning minister John Rau’s new and generous South Australian planning amendments since 2012, the monoliths will trigger longer-term problems. They include woefully insufficient parking spaces in adjacent streets, waste storage and disposal issues (multiple garbage bins-per-unit-per-level), and limited nearby recreation sites. Town Hall’s bean counters appear to be too busy celebrating the flood of new rates revenues, up $4.4m in the past year, to be concerned. Other challenges are quietly festering. A November 2015 Town Hall commissioned report tabled in 2016 revealed that policy levers applying stringent adherence to minimal energy performance standards in the National Construction Code for buildings like these apartment columns of glass and steel aren’t directly controlled by either Town Hall or the SA government.

It means that energy performance requirements haven’t been met. They also haven’t been tightened since 2009, and won’t be until 2019. During this period, the city’s skyline has erupted with high-energy-consuming apartment and hotel towers and their owners and occupiers are paying the price. “The lack of attention to the fundamentals of energy efficiency policy is without precedent internationally and will work against the attempts of SA and others to reduce their greenhouse gas emissions,” it warns*.

In May 2016 and again in August 2016 the state government quietly revised down population and housing growth forecasts. However, they still remain naively high. Future historians will conclude that the sudden, massive government rezoning of land along city and adjacent suburban arterials fuelled one of the state’s great property development booms for those who happened to own the land or used cheap money to snap it up.

Now that Mr Rau’s new rules are woven into development plans, it means that towers beyond 12 storeys could be built without provision for fundamental adjacent social and economic infrastructure plan upgrades. This lack of government foresight has similarities with the sort of ‘planning’ that occurs in thirdworld countries. Indeed, Adelaide is seeing consequences already, with SA Water about to spend millions, forced into upgrading a major sewer main west of the city, simply because of sudden tower number growth in the CBD ‘and associated residential infill’ east of the city. SA Water customers across the metropolitan area will foot that bill – and any others that follow.

There’s also been huge growth in high-rise city hotel towers – with seven approved for construction in 2016, despite a glut of existing empty rooms most months except for Mad March and during specific, short-term, government-funded festivals at other times.

Premier Jay Weatherill’s mid-June 2016 announcement to extend by another 12 months stamp duty exemptions for off-the-plan buyers of city apartments, offering savings
of an average $15,500 also says much. It’s been extended, too, beyond the city, highlighting the trouble suburban property hucksters are having selling cramped cupboards-without-yards in large multi-storey blocks on recently rezoned land facing suburban main roads. Were the apartments ‘boom’ to be responding to real demand, this carrot would be unnecessary. The government exemptions would reduce by more than $7m potential state treasury revenue (if sales were actually buoyant), at a time treasury is desperate for revenue. Superficially, the boom has been impressive. The challenge for government ministers now is to maintain the population growth myth just long enough to get past the March 2018 election.

* [Pitt and Sherry – Carbon neutral Adelaide: foundation report, Nov 2015, page 55.]

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