Record apartment building continues in Adelaide as vacancy rates rise

Apartment construction continues at record levels in Adelaide with house building activity also now on the rise.

Latest ABS data reported that 561 units were approved for building which is a new monthly record high total for the city and well ahead of the 284 recorded over the previous month.

So far this year Adelaide has approved 2850 units for building which is 439 more or 18.2 per cent higher than the 2411 approved over the same period last year.

The number of Adelaide house approvals also increased over October up from 483 to 540 and the highest monthly total recorded since July 2014. Despite the monthly rise, 4677 houses have been approved for building in Adelaide over the first 10 months of this year which is 412 fewer or 8.1 per cent lower than the 5089 approved over the same period last year.

Historically high levels of apartment construction are a positive for the Adelaide economy although supply is typically likely to move ahead of demand over the short-term.

Increased dwelling construction may be impacting the rental market with vacancy rates in Adelaide on the rise. The latest Domain vacancy rate for houses reports that house rental vacancies eased slightly over November increasing from 1.7 per cent to 1.8 per cent. Although rates increased over the month, there is still a shortage of house rental properties.

Reflecting recent high levels of construction, apartment rental vacancy rates increased over the month from 2.4 per cent to 2.5 per cent and are likely to continue to rise and provide more choice for tenants.

Although overall residential rental vacancy rates increased from 1.9 per cent to 2 per cent over November, Adelaide reported the second lowest result of all the capitals following Hobart at 1 per cent.

Dr Andrew Wilson is Domain Group Senior Economist Twitter@DocAndrewWilson