41 Currie Street

After over 3 months of negotiations it looks like we have finally secured this office building and adjoining carpark for one of our clients based overseas.

We are really excited about managing this asset and adding substantial value with some strategic redevelopment in this fabulous location. Watch this space as we transform this property in a number of ways.

City Housing Diversity

We spend a lot of time around high-quality modern apartment and townhouse buildings in the Square Mile during the normal course of our business of developing, selling and leasing our clients' properties. However, the city also has a long history of providing accommodation to people that the private property market can't accommodate, particularly lower income groups of all ages. We think this is important because a city's vitality depends on the diversity of its residents.

One of the most recent housing initiatives is "Common Ground Adelaide Ltd". Set up by the SA government and private sponsors, this organisation aims to provide good quality affordable rental housing to low income people and those at risk of homelessness. It mirrors the not for profit common ground project in New York founded by former Adelaide "thinker in residence" Rosanne Haggerty.

Their first project was completed in November 2007 and is known as "Common Ground on Franklin". It consists of 39 units (15 one bed and 21 studios) built above the central bus station.

The second project rapidly nearing completion is the re-habilitation and extension of a heritage listed building in Light Square which will contain 60 self contained apartments, Common Ground's head office, communal facilities, and health/welfare/vocational support services for residents.

Urbane, Urbaner, Urbanest

Urbanest ("Urban Nest") is a 17 level building under construction on the corner of North Terrace and Bank Street, and will be the city's latest addition to the student accommodation business.

The developers and operators are saying it will be ready to occupy at the start of the 2011 university intake and it comprises of 488 rooms and studios with the rentals starting at $225 per week which includes internet, electricity and insurance.

This accommodation product differs from other student buildings in the city because it offers clusters of between 4 and 6 bedrooms around a shared living space and fully equipped kitchen. These secure bedroom spaces have ensuite bathrooms and are about 13 square metres in size. There are also premium rooms at the top floors, and studios which are fully self contained but cost more money to rent.

Then and Now

223 North Terrace Adelaide comprises of 111 apartments in 2 buildings built over the old John Martins carpark. This Buchan Lee project was completed in the last quarter of 2006 and we manage around 45 apartments in the buildings for clients.

We thought it would be interesting to examine the rental growth since completion, so we picked a typical 2 bedroom apartment in the South building as an example. It was first leased on 23 September 2006, and was just rented to its 3rd tenant a couple of weeks ago. The 79 square metre 2 bedroom apartment is rented with a car park and on an unfurnished basis.

It first rented for $375 per week ($247 per square metre per annum) and current rental is $480 per week ($316 per square metre per annum) both for a 12 month lease period. So in a period heading towards 3 and a half years, this is an increase of 28%. Hopefully for the landlord this growth will continue for the next 3 and a half years - a 28% increase over the current rental would be $614 per week!

2010 Adelaide Apartment Predictions

Here we are at the start of a brand new decade, and the big question that interests us is: "What will happen to apartment values in the City of Adelaide over the next 12 months?"

Our educated guess is that the better quality apartments in the middle price range will increase by around 6.5% to 8%. This means that a well located 2 bedroom, 80 square metre, apartment with a secure carpark that sold for $470,000 in December 2009 could sell for around $505,000 in December 2010. A 110 square metre with 2 bedrooms, 2 bathrooms, secure carpark, storage cage, and a good size balcony in the same time frame could go from $650,000 to $705,000.

The macro factors that influence capital growth in the City apartment market include:

• Apartment supply. It looks like there won't be many new buildings completed during 2010 because developers are still having a tough time securing funds from the banks which are demanding a lot more equity contributions and very high levels of pre-sales. If supply of new apartment stock diminishes, price increases for existing stock can occur.
• A tight rental market. The rental demand for apartments in the city remains strong. It is underpinned by the international student market as well as the professional couples and corporates attracted by our vibrant city lifestyle, security, and the facilities offered by modern apartment buildings.
• Baby Boomers. Each year we see more of them coming into the City to live. The "lock and leave it" appeal of apartments, and the cafe lifestyle continue to be the strong drivers for this demographic.
• Good investor returns. Interest rates have gone up, but so have rentals, and buying an apartment as an investment is still a very big part of the city marketplace. This includes country buyers as a future city base or for the kids if they migrate to the city for uni at some time in the future.
• Consumer confidence. This is the feel good factor and our perception of how we feel about ourselves and our confidence in our economy. We are looking ok on this one but sentiment can change quickly and when confidence drops, people stop spending and buying apartments.

International students in the City of Adelaide

Every time we put a new city apartment or townhouse on our web site we get huge levels of enquiry from overseas students, so we thought we should do some research into this market.

We spoke to Becky, a market analyst at Education Adelaide who really knows her stuff, and we were staggered by the growth being experienced in the education industry. No wonder we get so many hits, emails and phone calls from international students!

The number of international students in South Australia as at June 2009 was 25,000, and this is an increase of 24.5% from last year. Education Adelaide anticipates that enrolments will

reach 32,000 by the end of 2009.

As at March 2009 some 3000 international tertiary students were living in the City and North Adelaide. This is an increase of 39.3% from 2006. The number is expected to grow to around 5000 toward the end of the year.

Approximately 30% of rental places in the City are taken up by international students.

This is amazing growth and not just our investors / landlords are benefiting from solid rental increases. Shops, cafes, lunchbars, and the educational institutions (obviously!) are winning out as well.

A great 1960's block of units

It's not often we see units from this era and we thought this group was worth highlighting.

It is situated in Da Costa Avenue in the near city suburb of Prospect, where most of the houses are 1920's "State Bank" bungalows that have been gentrified over the years. This group of units constructed of cement blocks (besser block was the term used back then) are still in good condition and are a great example of the contemporary style of architectural design of the times. Our client is a young lawyer and this is her first investment property (first of many we hope) and the rental is very reasonable.

Just think these units were almost new when Neil Armstrong walked on the moon!

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