Stable, Favourable: Why Developers are Turning to South Australia

Its Government might not quite be rolling out the red carpet, but South Australia is increasingly attracting developer interest as the positives keep stacking up. SA’s population is growing at its fastest rate—1.7 per cent—since 1981, and is the best-performing state economy in the nation this year. That is supported by the AUKUS nuclear submarine program and a renewable energy transition that’s projected to achieve 100 per cent net renewable electricity generation by 2026-27. The State Government is also taking significant steps to attract developers, with hefty investment in infrastructure, streamlined planning processes and simplified fee structures. It has reduced development timeframes from 54 to 75 months to 36 to 63 months through standardised templates and stricter council timeframes. In what’s being labelled the largest residential land release in the state’s history, the Government is targeting 23,700 new homes across major development areas over 30 years. These include Concordia, projected to comprise 10,000 new homes, as well as another 10,000 at Dry Creek, and 1700 at Sellicks Beach. And rezoning has been approved for an additional 2000 homes at Hackham. It’s precisely the sort of thing Victorian developer Ozzie Kheir wants to hear. Talking to The Urban Developer this month, Kheir lamented land release and approval bottlenecks at the state-government level in Victoria. In South Australia, there doesn’t seem to be as much of a bottleneck. The state is also looking to increase regional housing supply, with 12 projects announced this week as part of the state’s $10-million Regional Housing Initiatives Program (RHIP). The Government is also on the hunt for a development partner for an Innovation Centre at Lot Fourteen, the 17,000sq m building that will house $100 million worth of SA and federal defence, space, cyber and critical technologies. Property Council of Australia and Procore research shows confidence in South Australia at 132 points, well above the national average of 108. It’s little wonder more developers are tapping into the SA market. Victorian-based Villawood Properties was among the first mainstream developers to cross into the SA market in recent times. Villawood chief Alan Miller said he had been watching the South Australian market for a while, “particularly where the median house price was four years ago. It was well below the average for Australia and even below Tasmania. “I knew South Australia was going to fire.” ▲ Villawood chief Alan Miller. The developer is working on a $300-million upgrade to the Morphettville Racecourse in SA. Miller says changes in overseas and interstate migration also prompted Villawood’s move. “South Australia was set to increase its population significantly, which it hadn’t experienced for many years,” Miller says. “I credit affordability and the state economy. If you look at the patterns of immigration, once a particular location starts to take off, others tend to follow. And South Australia has everything. You can see the appeal reflected in the immigration numbers.” Since 2021, Villawood’s projects have driven close to 1000 land sales, including developments at Oakden, Andrews Farm, Gawler, Aldinga and Seacliff. The company has also partnered with Hostplus and the South Australian Jockey Club for a $300-million redevelopment of Morphettville Racecourse. While Miller attributes Villawood’s success in South Australia to an experienced local development team, and the state’s growing economic importance, he also tips his cap to the SA Government. “It’s stable, and the planning regulations are favourable,” he says. “It’s easier to do business compared to other states, particularly Victoria and New South Wales. “Things can get done more efficiently. All the fees and charges. It’s just been well laid out.” SA-based developer Otello is also capitalising on its home state’s growth. Director Daniel Harris highlights government incentives for first-home buyers as a game-changer, particularly the removal of the $650,000 price cap and zero stamp duty. “Now, first home buyers get a $15,000 grant without the price cap, so you could spend a million dollars to still get the grant,” Harris tells The Urban Developer . “But the big-ticket item there is zero stamp duty and no price cap. So that’s potentially 6 per cent of a purchase that a buyer previously had to come up with. That’s a big incentive.” Otello has recently announced a $62-million mixed-use project at Kent Town, adding to its portfolio across Adelaide. Current projects include an eight-storey mixed-use development at Mile End, a three-storey mixed-use complex at Tonsley, a specialist disability accommodation project at Sturt, and a $24.7 million, seven-storey development at Unley. Otello is also working with Renewal SA on the Muse apartment tower at Bowden. ▲ A render of the Muse apartment tower at Bowden. Despite all the good news stories, challenges exist in this booming market. The state faces potential labour shortages, particularly due to government-funded infrastructure projects and social housing initiatives. This has led many developers, including Otello, to create their own construction companies to manage costs and timelines effectively. “The flipside of all the government-funded infrastructure and social housing projects in the pipeline means there is significant pressure on subcontractors to be able to complete these works, which is inflating prices in the subcontractor market,” Harris says. “We’re not yet where Queensland or Melbourne is, but we’re getting close ... next year is when we expect to face real challenges. So that’s kind of what we’re bracing ourselves for and getting set up for. “We’ve taken the same path as a lot of developers over the past few years and created our own construction company. It’s been really the only way that we’ve been able to get the projects to stack up is to be able to do the construction ourselves.” Another significant concern is a shortage of industrial land. Property Council of Australia research indicates just 146ha of immediately available industrial land of a potential 1500ha, which could be exhausted within two years. This scarcity has driven a 300 per cent value increase in Adelaide’s outer north during the past three years, threatening the economic viability of industrial development. ▲ Industrial land values have skyrocketed in the state. And affordability is becoming an issue. The most recent Housing Affordability Report showed South Australia had the largest decline in affordability in the past 12 months, with median-income households able to afford only 16 per cent of all homes sold, down from 49 per cent in 2020-21. To address these challenges, premier Peter Malinauskas announced that the state’s Housing Roadmap would designate 15 per cent of all new developments as affordable housing as well as plans to reduce development timeframes by up to 18 months. “The only way to address the housing crisis is to build more homes faster,” Malinauskas says. Despite these challenges, developers remain optimistic. “Overall, I think the South Australian Government has been positive and effective in working with the industry to ensure adequate housing supply at a time when we all need it,” Miller says. “Population growth isn’t going to stop in the short term. We’re seeing a return to pre-Covid levels of interstate migration but with even more overseas migration. “That drives housing affordability. But we’re doing all we can in terms of housing design and innovation to make housing more affordable, especially for younger people.” Harris echoes this sentiment: “Adelaide’s in a really good position over the next couple of years to see strong demand.” Population growth, a rush of residential and infrastructure projects, innovation investment and a government prepared to grease the wheels to meet ambitious housing targets. It seems there’s a lot about the Festival State for SA developers, and those willing to jump borders, to celebrate. You are currently experiencing The Urban Developer Plus (TUD+), our premium membership for property professionals. Click here to learn more.

Stable, Favourable: Why Developers are Turning to South Australia

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